Making Hay in a Bullish Grain Market - Stepping Up Our Game

There is a great deal of optimism out there amongst cash croppers, as markets flirt with $6 corn and $12 soybeans. Side effects of this bullish market are higher fertilizer prices, increased demand for corn and soybeans land, and higher land rental rates. How will this impact our ability to produce profitable forages? What production strategies can we use to maintain our competitiveness?

High Fertililizer Prices

Fertilizer prices peaked about 2 years ago at what seemed to be unaffordable levels, but then declined as the economy softened. However, prices are on their way up again. While prices are very volitile, this spring many of us could be paying in the neighbourhood of $600/T for urea, $825/T for MAP, and $700 for muriate of potash, plus application costs.

Forage crops remove a lot of nutrients and therefore have high nutrient requirements. With an alfalfa-grass mixture, the typical amount of phosphorous and potassium (P & K) removed per tonne of hay harvested is equivalent to about 14 lbs of P₂05 and 61 lbs of K₂O. Therefore the value of the removal is currently close to 2.0¢ / lb ($44 / tonne) of dry hay harvested. As an example, assuming a mixed stand with a modest yield of 3.2 tonnes per year, hay will remove about 46 lbs of P₂05 and 193 lbs of K₂O, with a value of almost $140/acre .

Without replacing P and K with manure or commercial fertilizer, the soil test will drop quickly. Assuming that it takes about 35 lbs/ac of P₂05 and 20 lbs/ac of K₂O to move the soil tests by 1 ppm on some soils, after only 4 years the P soil test could drop by 5 ppm and the K by 38 ppm. At lower soil test levels, this is commonly referred to as "soil mining" and is not sustainable. Low soil P and K fertility significantly reduce forage yields. The short and long term costs of poor fertility are much higher than the cost of the fertilizer.

Soil Analysis

Maintain reasonable P and K levels. Low fertility will significantly reduce the productive longevity of a stand. Higher fertilizer prices require targeting your fertilizer applications more strategically. Use a recent soil test to guide fertilizer applications. If the K soil test of the field is below 120 ppm, you can expect a yield response from top-dressing potassium. (http://www.omafra.gov.on.ca/english/crops/pub811/3fertility.htm)

Nutrient Recycling In Manure

Livestock producers have an advantage in maintaining soil fertility where manure is available to apply during the rotation. The best option is still to spring apply manure to corn crops in the rotation. However, there are some potential advantages to applying liquid manure to forage crops, including yield and quality benefits, spreading the workload, reducing manure storage requirements, preventing soil compaction, and reducing environmental risk.

Need To Add Value To Marketed Hay

Hay producers that market hay off the farm need to consider the replacement cost of P and K removed in hay. They need to "add value" to their hay in the market place by producing a quality product. It just doesn't make sense to produce and sell $20 round bales when they contain almost that much value in P and K.

Livestock will still need to be fed. Can the market pay the kinds of prices required to reflect high land and fertilizer prices? I don't know, but if it doesn't there may be a lot of hay acres move to other crops.

Historically, standing hay has often been an excellent buy. The P and K removal alone means that the historic 1 - 2¢ / lb of standing hay is way under the mark today, even before considering an opportunity cost for land rental and amortized establishment costs.

Higher Land Costs

High cash crop prices are also driving up land rental rates as farmers compete for land. Many older hay fields are being rotated to corn and soybean to take advantage of the higher prices. Some of the more marginal fields may be improved with tile drainage. What will all this mean to hay availability and prices? Are we moving to an era when hay inventories are much tighter and prices are on the increase?

There is a wide range in land rental opportunity costs across Ontario, from well over $200 / acre to less than $20. Assuming a $120 rental rate for field that produces 3.6 tonnes of hay per year, the "land cost" portion would be about 1.5¢/lb. On the other hand, poorer land (likely not able to grow corn or soybeans) renting for $25/ac and yielding 2.3 tonnes would have a land cost of about 0.5¢.

Increase Forage Yields By Shortening The Rotation

Where land costs are significant, forage cost-of-production (COP) can be reduced by increasing yields per acre. It's time to step-up our forage management by improved establishment and weed control, and by scouting for insects and disease. Let's give forages the same level of management that is given to other field crops.

Alfalfa yields are usually their highest the year following establishment, and then gradually decline with stand age due to disease, loss of vigour and plant thinning. By the 4th year following establishment, yields can often decline to about 75% of the maximum yield. The decline can be even more rapid and significant with aggressive cutting schedules. This yield loss wouldn't be tolerated in any other crop without doing something about it, so neither should it be accepted with forages.

A strategy to manage higher land costs is to consider shortening the number of years of forage in your rotation, and using the legume nitrogen credit when rotating into corn. The optimum maximum age of an alfalfa stand will vary, but many stands suffer from "old age". Forage stands with greater than 50% legume content enable the grower to deduct 100 lbs/ac of N from the following corn crop's N requirements. That is currently equivalent to over $60/acre, significantly offsetting the additional forage establishment costs. Stands that are one-third to one-half legume get a N credit of about 55 kg/ha (50 lb/ac). Research shows that in addition to the nitrogen credit, there is a significant yield benefit of alfalfa plowdown to corn of about 10 - 15%.

Establishment Costs Relatively Small

As an example, establishment costs using custom rates for machinery operations, herbicide and seed costs that total $165/acre in a 4 year rotation at 3.6 tonnes / acre, are typically about 0.5¢/ lb of hay. In many cases, this will represent only about 7% of the COP, far less than either fertility, land, harvest or storage. (Table 1)

Use Improved Varieties

While some farmers are reluctant to use improved forage varieties because of perceived high cost, forage seed actually represents a very small percentage of the total cost of producing forage. Seed costs of $63/acre (14 lbs @ $4.50) pencils out to only about 2.5% of the total COP. Using cheap seed is a poor strategy, particularly with high land costs. Buying "common seed" or varieties of poor or unknown performance is no bargain when considering the risk of lower yield or winterkill.

Improve Forage Quality

With increased costs and the importance of every forage acre counting, forage quality will be increasingly important. It just doesn't make financial sense to spend the money to produce the forage and then lose quality to weather risk, poor harvest management and lack of storage. Cut early to avoid losing nutrient quality to advanced maturity. Use hay drying and silage technology and management to prevent harvest losses. Remove bales from the field as soon as possible. Store hay under cover and off the ground to prevent spoilage. It may be time to reconsider building that hay storage that you need.

Summary

Higher hay prices, and higher land, fertilizer and input costs requires us to do the best we can to grow, harvest and store our forage crops for maximimum yield and quality, with minimum losses. Some strategies include:

• soil testing and managing P and K fertility,
• increasing yield with improved forage establishment, weed control, insect & disease management,
• shortening forage stand age in rotations and using the N credit,
• using improved varieties,
• improving quality by cutting early, and using hay drying and silage technology,
• storing hay off the ground and under cover, and
• adding value to cash crop hay with quality, the right bale and marketing to cover higher costs.

	More Productive Land 4 Year Rotation 3.6 tonnes / ac / year cents / lb of hay	Less Productive Land 8 Year Rotation 2.3 tonnes / ac / year cents / lb of hay
Establishment costs	0.5	0.4
P & K removal	2.0	2.0
Land rental (opportunity cost) $120 / ac $ 25 / ac	1.5 n/a	n/a 0.5
Harvest (cutting, raking, baling, etc)	2.1	2.2
Storage	1.0	1.0
less N Credit	(0.2)
Total Costs	6.9	6.1

Notes

• return to risk & management not included
• custom rates used in establishment & harvest costs
• these are generalizations for comparison and discussion purposes only - use your own assumptions and calculations