The addition of ethanol to the markets for corn helped push up corn prices, and to compete for acreage, soybean prices went up as well. Wheat prices climbed also to compete for acres, and that left hay, which was not to be left out of the party either. Hay prices have risen to ensure enough is produced, but since hay is not traded in Chicago, Minneapolis or Kansas City, what is the value of hay?

That is a good question, says Rory Lewandowski of Ohio State University Extension. His observations in the July edition of the OSU Ag Manager newsletter indicates that he believes hay is at least worth the nutrients it removes from the soil plus the cost of producing it. But he asks rhetorically, “Whether hay is actually worth what it costs to produce it is yet another question.” Let’s work through his estimates and see how close you are to his final answer.

Lewandowski uses a couple of recent anecdotes to frame the discussion. A land owner who was renting hay ground thought he should get $2 out of the $5 charged by the operator for small square bales. Another anecdote indicates that a lot of grass is being baled and will reduce the price of hay.

Lewandowski totaled up 40 lbs of nitrogen, 13 lbs of phosphate and 50 lbs of potash which are removed from the soil for each ton of hay produced. Depending upon the source of the replacement fertilizer, the ton of hay consumed $71.81 to $81.95 worth of nutrients. Spreading the fertilizer is an expense that might be hidden so Lewandowski used a $4.50 per acre rate for applying dry bulk fertilizer. He says if you are questioning the decision to account for the fertility cost, then consider the fact that those nutrients are removed from the soil and will not be available for corn, soybeans, or some other crop the following year. Even if you did not fertilize this year, your cost of production in the hay will have to reflect an expensive application in a future year.

The cost of machinery, labor and other expenses can be gathered in your state’s custom rate sheet or farm machinery cost estimates. You’ll have a mowing and possible conditioning cost, raking, baling and hauling. Utilizing cost per ton will allow prospective buyers to comparatively shop. And fertility produces more hay and that means more tons per acre. Add the mechanical costs to the nutrient cost and you may have a charge of $100-plus for a ton of hay.

If that seems to be a high price for someone to pay, maybe your fertilizer price is less or maybe application charges were built into the nutrient cost. Your mowing, raking, baling, and hauling charge could be a bit less as well, or maybe even more. If your hay contained alfalfa or another legume, its nitrogen contribution to the soil could mean a reduction in price.

But instead of lowering the cost, maybe your hay has been tested at various labs, and its quality can be certified. Owners of horses are looking for quality hay and may be able to pay more for a quality product they can read the nutrient value. Instead of lamenting the lack of a futures market for hay, there may be a hay auction nearby, or one within trucking range that would help you determine the value of the hay plus the basis. Nevertheless, the cost of hay needs to reflect its content and the cost of production. But you have also not paid yourself for the enterprise to produce and sell the hay, which is a return to labor and management. Add 25% to 30% to the basic cost, and that is your income that is necessary to feed your family and provide a profit.

Summary:
No matter how much demand there is for corn, soybeans, wheat, and other grains, there will always be a demand for good hay for horses and livestock, and its value will be competitive with row crops. Determine its value, either by auctions of relatively comparable hay, or by determining the value of the nutrients the hay removes from the soil plus the cost of baling, with a return to labor and management.