Pricing Corn for Silage
Farm Business Management Update, August 2002
By Tom Stanley
"What is corn silage worth this year?" And the standard Virginia Tech-issued response is . . . "It depends." So many factors impact corn silage value, not the least of which is how much the buyer is willing to pay.
In this article, I would like to suggest using cost of production and moisture content as the primary guide for pricing silage. This may be the best approach in situations without a number of ready buyers or sellers but just two parties trying to arrive at a fair price.
The conventional approach of the economist is to price the silage relative to the opportunity cost: what the corn is worth if sold for grain or the value of alternatives to corn silage for the buyer. The problem is the commodities most often used to make this comparison (corn grain and soybean meal) are not good comparables. Corn grain and soybean meal are dry, dense, easily transportable forms of nutrients that are easily preserved. In contrast, corn silage is wet, bulky, cumbersome to transport, and must be managed and stored in a particular fashion if it is to retain its value. Since so much corn grain and soybean meal is produced in the Midwest, the quantity of corn grain and soybean meal available on the open market (and hence its price) may not correspond to the forage yields in a particular locality. Because of these differences, the opportunity cost may not reflect the local value of the silage.
Some people use a moisture-adjusted local value of high quality hay as an indicator of the value of corn silage. This comparison can be helpful since usually more hay is sold than silage. The local price for high quality hay would correspond to local availability and value of forage. But hay is still not a perfect match. Hay, being dry, is more easily transported and stored. Most buyers of corn silage are dairymen, and a very few dairy farmers are willing to convert to hay as the primary forage source.
Typically, the grower/seller of corn silage is in close proximity to the user/buyer and the alternatives these two farmers face are not inviting. The grower is usually faced with low grain yield (due to poor weather that has forced the buyer to look for silage to purchase) and low grain prices (because the Midwest floods the market with grain). The buyer MUST have silage to feed his dairy cows, or he will face a very serious loss in milk yield. What is fair?
The Extension Farm Business Management Budgets can help. The budgets are good indicators of what typical costs of production are in Virginia, and they allow folks to enter the known individual costs. For example, the budget for minimum tillage corn silage with a yield of 15 tons per acre values the silage before harvest between $14 and $18 per ton depending on how you account for labor and fixed costs. A grower might want to enter his/her labor at $12 to $15 per hour as opposed to the default value of $7.50/hour that appears in the budget. The budgets allow grower and buyer to enter wage rates with which they are comfortable and to sort-out harvest costs since the buyer is often doing some or all of the harvest work. Using $2-$2.50 per ton per loaded mile for hauling silage and $12 per hour for labor seems to bring harvest costs in the Extension Budget in-line with rates charged by custom corn silage harvesters in the Shenandoah Valley.
Trying to estimate silage yield of standing corn is extremely difficult, since the grower and buyer are more likely to be satisfied if they sell the silage on a per ton basis. They should take the time to get empty- and loaded-weights of the forage wagons at least once during harvest and then count wagons loads harvested.
The grower and buyer need also to consider moisture content. Sixty-five percent moisture (35% dry matter) is considered ideal for most corn silage. Chopped whole-plant corn going into horizontal trenches or piles can be as wet as 70% moisture (30% dry matter) and still make good quality silage without too much juicing. Chopped whole-plant corn going into upright, oxygen- limiting siloes can be as dry as 55% moisture (45% dry matter) and still have adequate fermentation to make high quality silage.
Figure 1 and Table 1 serve as a general guide for how the value and quality of silage changes with moisture content.
Many factors impact the value of corn silage quality. I would encourage any corn grower planning to sell corn silage on a regular basis to look at the materials Bobby Clark (Extension Agent, Crop and Soil Science, Planning District 7) compiled on Contract Silage Production. They are available through his office in Shenandoah County and are a comprehensive description of how corn silage could be grown on a contract basis.
For people trying to determine a fair price for silage with little time to spare, they may be best served by basing the sale price on what their labor is worth, what it cost to grow the corn, and the moisture content of the chopped corn.
"Silage and Hay Preservation;" Pitt, R.E.; 1990. Northeast Regional Agricultural Engineering Service.
"Contract Corn Silage;" Clark, R. A.; 1998. Virginia Cooperative Extension.
Table 1: Value of Corn Silage (Chopped and hauled by the buyer; silage going to horizontal trench silo*)
|Moisture %||Dollars per Ton|
|58%||18.21 **||21.25 **||24.29 **|
|*If moisture content is outside of this range, serious ensiling problems may impact silage value. Ideal moisture range varies with storage structure. These prices are for example only, actual values will vary with locality and season.|
|** Values in this table are based on weight of dry matter only. For the horizontal trench silo, this moisture level is probably too low and therefore would hurt the value of the crop as silage.|
Contact the author at email@example.com.
Visit Virginia Cooperative Extension