Value of drought-stressed corn silage for 2012
The drought that first hit western Kentucky and spread to the rest of the state in late June has taken a toll on this year’s corn crop. Average yields that typically would be in the 130-160 bushel per acre range look to be, in many cases, less than 50 bushels and in some cases almost zero. Many grain farmers are looking at options to salvage especially poor corn crops. Cutting silage for cattle feed is a major option.
Before cutting corn for silage, there are two things that should be done:
1) Test the corn for potentially high nitrate levels. High nitrate levels in silage can kill animals. Although proper ensilaging can reduce levels by half, it can still be potentially high. See the following site for more information about nitrate testing: http://www.uky.edu/Ag/GrainCrops/Briefs/nitrate_testing2012.html
You can also contact your county agricultural extension agent to help in this process.
2) Contact your crop insurance agent. Corn that was insured for grain harvest can generally be released for silage cutting, but you first need to contact your crop insurance agent and ultimately talk to an adjuster about how they will determine the grain yield. This needs to be done before the crop is cut for silage. For more information on this, see Cory Walter’s article (Drought Conditions and Crop Insurance) at: http://www.ca.uky.edu/agecon/index.php?p=110
Once these things have been done, and assuming neither presents a problem, then the silage needs to be valued. This is done in two ways: 1) From the perspective of the grain farmer, and 2) From the perspective of the livestock farmer. Each will have a unique perspective, and the two values will generally be quite different. It is only when there is an overlap in values that both could benefit from cutting corn for silage.
If for example, the silage is worth a minimum of $20/ton to the grain farmer, and it is worth a maximum of $40/ton for the cattle farmer, then there is room to negotiate a price in between that both would benefit from. However, if the silage was worth a minimum of $30/ton to the grain farmer and was worth a maximum of $20/ton for the cattle farmer, then there would not be any room to negotiate, and it would not be cut for silage.
Although there are a lot of variables that individual grain and cattle farmers need to estimate as they work through this process, the following general statements can be made for this year.
1) If the corn is going to yield above 60 bushels, it would be hard for the cattle feeding value to be worth more than the grain value with corn prices above $7/bu.
2) If the corn is going to yield less than 20 bushels, in most cases the cattle feeding value would be worth more than the grain value.
3) If the corn yield is somewhere between 20 and 60 bushels then both parties need to carefully evaluate the grain and silage values. There still may be potential for an overlap in values, but it needs to be evaluated on a case by case basis.
To help with this process, the following tables are included to value drought-stressed silage given various scenarios. Table 1 values silage from the perspective of the grain farmer, which is the minimum price per ton needed for the corn silage (to be as profitable as harvesting and delivering the corn to the local elevator). Producers need to make their best estimate of both silage and grain yield to pick the most representative situation. As an example, if a grain farmer estimated that a field would yield 20 bushels of grain and 10 tons of silage, the minimum that he would have to receive for the silage to make it worthwhile is $17/ton. If he had to pay for any of the chopping cost, he would add these costs on a per-ton basis to this minimum.
Tables 2-3 estimate the maximum silage value from the perspective of the livestock farmer. Table 2 assumes a 5-ton silage yield, and Table 3 assumes a 10-ton silage yield. This corresponds to total silage harvesting costs (cutting, hauling, filling, etc.) of $16/ton and $13/ton, respectively. In other words, the lower silage yield has higher per-ton costs.
As an example, we have a livestock farmer who also estimated a 10-ton yield, can buy hay for $80/ton (the alternative feed), and estimates a 25 percent waste rate on hay. So, he goes to the left-hand side of table 3 and finds the row where the assumed hay price is $80 per ton and waste rate for hay is 25 percent.
Next, let’s assume we have a TDN of 60 percent and a waste rate of 20 percentfor the corn silage. Given those assumptions, he reads down this column until he hits the row from the previous step and determines that he can pay up to $29 per ton for the silage. This assumes that the livestock feeder will also be paying the chopping, filling, and delivery costs. If he was not responsible for any of these costs, he would add this to the maximum feed value.
Combining this with the grain producer example, we have the following potential scenario: The minimum selling price for the grain producer was $17/ton, and the maximum feed value for the livestock producer was $29/ton. So the two could negotiate a price in between these two values, and they would both benefit from cutting the corn for silage.
There are a lot of assumptions that have gone into this analysis. For example, hay quality is held constant at 50 percent TDN. If the quality hay that you could potentially purchase is significantly different, then the calculated feed value will not be accurate for you. Please contact the author to help better evaluate these types of situations.
This article was written by Greg Halich, an associate extension professor
in the University of Kentucky College of Agriculture. The article first appeared
in the July 26 edition of Economic and Policy