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Pricing Corn Silage: Another Look

John Hanchar, Farm Business Management
Northwest New York Dairy, Livestock & Field Crops

July 8, 2013

The following summary is from "Pricing Corn Silage." (Ag Focus. August 2012. Pages 1 and 3.)
Summary
  • Price analysis suggests that the price of corn silage depends on corn silage quantities, the price of alfalfa hay, the price received by farmers for milk, and the price of corn grain.
  • Estimated corn silage price is sensitive to alfalfa hay price and corn grain price.
  • Price estimates combined with understanding of relevant supply and demand factors from an individual farm business owner's perspective can aid decision making regarding corn silage price. Given current (May, June 2012) alfalfa hay and corn grain prices, price analysis suggests an estimated corn silage price of about $41 per ton.

Given recent market conditions, the first two points still hold, but the third would be revised to read
  • Price estimates combined with understanding of relevant supply and demand factors from an individual farm business owner's perspective can aid decision making regarding corn silage price. Given current (January, February 2013) alfalfa hay and corn grain prices, price analysis suggests an estimated corn silage price of about $48 per ton.

Changing Market Conditions Since May, June 2012
For the May, June 2012 estimate
  • alfalfa hay price was $180 per ton, rounded up from 175 reported by USDA/NASS (Agricultural Prices. Washington, DC. May 31, 2012.)
  • the price of corn was $6.50 per bushel, rounded up from 6.18 reported by Western NY Energy ("Corn Bids." June 12, 2012.)

Since the May, June 2012 period, corn grain prices rose to around $8 per bushel and then declined to current levels of about $7.15 per bushel. Alfalfa hay prices have risen to about $250 per ton using the USDA/NASS source.
Corn Silage Price AnalysisEmpirical price analysis suggests that corn silage price is a function of corn silage quantities, alfalfa hay price, the price received by farmers for milk sold, and corn grain price. Ordinary least squares regression provided an estimate of corn silage price as a linear function of the above variables. Even though the analysis is somewhat rough, elementary, readers of the August 2012 article note that the analysis and estimates generated should be helpful to farm business owners looking to price corn silage.
The New York State Agricultural Statistics Service is the source of market year average price and quantity data for the variables listed above for the period 1991 through 2010 (http://www.nass.usda.gov/Statistics_by_State/New_York/index.asp). 
Updated Corn Silage Price EstimatesCorn silage price estimates can be generated using the ordinary least squares regression results reported in August 2012, where estimated corn silage price is a function of alfalfa hay price and corn price, other factors (corn silage quantity and milk price) fixed at average levels for the period 1991 through 2010.
  • estimated corn silage price ($/ton) = 10.621 + (0.079 x price of alfalfa hay ($/ton)) + (2.448 x price of corn ($/bushel)).

Suppose
  • alfalfa hay price is approximately $250 per ton (USDA/NASS. Agricultural Prices. Washington, DC: National Agricultural Statistics Service. January 31, 2013.), and
  • the price of corn is roughly $7.25 per bushel (Western NY Energy. "Corn Bids." February 11, 2013. Approximate value of those actually reported.)

Using the estimating equation and the above prices for alfalfa hay and corn grain yields an estimated corn silage price $48 per ton.
Estimated corn silage price is sensitive to alfalfa and corn grain prices. Suppose alfalfa hay price remains at $250 per ton, but corn grain price is $8 per bushel. Then, the estimated corn silage price is $50 per ton. Recent conversations with producers suggest alfalfa hay prices higher than $250. Suppose alfalfa hay price is $300 per ton, and the price of corn grain is $7.25 per bushel. Then, estimated corn silage price is $52 per ton.
Corn silage price estimates combined with understanding of relevant supply and demand factors from the individual farm business owner's perspective can aid decision making regarding corn silage price.
For more information please contact John Hanchar.
Thanks to Christian Yunker, CY Farms, LLC/Batavia Turf, for providing valuable comments on earlier versions of this work.


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2019 Corn Silage Pre-Harvest Workshop - Penn Yan

September 17, 2019
10:00am to Noon
Penn Yan, NY

Corn silage harvest is drawing near. The way corn silage is harvested and stored is a single event that affects your operation for the entire next year. Are you prepared to set your operation up for success? 
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Ontario County Fun on the Farm

September 21, 2019
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Fun on the Farm attracts thousands of people and gives us the opportunity to communicate to the community the benefits of the agricultural production in Ontario County, the state, and the nation.

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This two-day AI workshop will be held on September 24 and 25. 

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Announcements

Preventing Sexual Harassment on Farms

If you're wondering how to get your farm business in compliance with NYS Sexual Harassment Regulations, you've come to the right place.  The 2018 New York State budget included new regulations addressing sexual harassment in the workplace that became effective on October 9, 2018 for all New York employers, including agricultural employers. All employers are required to have a sexual harassment prevention policy and to provide annual, interactive sexual harassment prevention training for all employees.  Check out the resources developed by Cornell Ag Workforce Development, including step-by-step instructions and farm-friendly training videos.


RMA Announces Additional One-time Changes to Prevented Planting Provisions

June 29, 2019

RMA Announces Additional One-time Changes to Prevented Planting Provisions
for 2019 Crop Year

In response to delayed and prevented planting resulting from above average rainfall and wetness, the USDA Risk Management Agency has made a one-time change to the 2019 crop year prevented planting rules that effectively allows silage corn, if planted as a cover crop following local agricultural expert guidelines, to be acceptable as a post-prevented planting cover crop. Under this one-time rule change, producers are allowed to produce this crop while retaining their prevented planting payment. This change couples with previously announced one-time changes to the prevented planting rules - including expanded acceptable uses for post-prevented planting cover crops and a change in the cover crop haying and grazing start date rule - serve to help those struggling to meet their forage needs due to the weather.

Read the full article from the New York Crop Insurance Education Program.

The USDA-RMA states that "For crop insurance purposes, a cover crop is a crop generally recognized by agricultural experts as agronomically sound for the area for erosion control or other purposes related to conservation or soil improvement." PRO-DAIRY specialists Joe Lawrence and Karl Czymmek and Dr. Quirine Ketterings, Professor and Director of Cornell Nutrient Management Spear Program have released a letter stating "Corn on Prevented Planting acres meets these objectives."


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