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Pricing Corn Silage - Fall 2013

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

September 23, 2013
Pricing Corn Silage - Fall 2013

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 most recently available alfalfa hay and corn grain prices (August, and September/October 2013, respectively), price analysis suggests an estimated corn silage price of about $42 per ton.
Determining Corn Silage Price
A farm business owner can examine how much he/she would be willing to supply to a market at a given price. Cost of production analysis combined with consideration of other factors helps to define the supply relationship. A seller can develop a target based upon the above, but actual market conditions provide no guarantee that a buyer will purchase quantities desired at a price that achieves the producer's cost target.

Some farm business owners might approach the problem of determining corn silage price from a value in production, or input demand perspective. The amounts of corn grain and corn stover in a ton of corn silage, relevant prices, and corn silage's place in the milk production process are key variables. A buyer can develop a price target based upon the above, but actual market conditions provide no guarantee that a producer will sell the quantity desired at a price that matches the buyer's willingness to pay.

For more information regarding the two approaches mentioned above, visit the team’s website at and click on the “Forages” tab.

Although factors in price determination, the two approaches described above, by themselves, in isolation don’t completely determine market price and quantity. Supply and demand relationships work simultaneously in markets to determine price and quantity. Empirical price analysis brings supply and demand relationships together to determine price.

Corn Silage Price Analysis
Empirical 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 original article describing this work in August 2012 noted that the analysis and estimates generated should be helpful to farm business owners looking to price corn silage.

Corn Silage Price Estimates – Fall 2013

Corn 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).
Consider the following as current market conditions.
  • alfalfa hay price is $205 per ton (USDA/NASS. Agricultural Prices. Washington, DC: National Agricultural Statistics Service. August, 2013.), and
  • the price of corn is roughly $6.00 per bushel (Western NY Energy. “Corn Bids.” September 10, 2013. Approximate value based upon reported bids for September through October 2013.)
Using the estimating equation and the above prices for alfalfa hay and corn grain yields an estimated corn silage price of $42 per ton.

Estimated corn silage price is sensitive to alfalfa and corn grain prices. Earlier this year, producers described market conditions very different than those described above. 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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calendar of events

Upcoming Events

Beginning Farmer/Hobby Farmer Workshop $5/pp, class size is limited, so pre-register by April 15th!

April 27, 2019
9:00 am - 1:00 pm
Canandaigua, NY

This hands-on workshop is for beginning or part-time farmers who would like to improve their farm machinery skills, learn to properly and safely maintain their equipment to protect their investment. If you have been thinking about buying a tractor, new or used, two-wheel or four-wheel drive, compact or utility or more come join us. Topics include: selecting the right size/type tractor for the job; basic maintenance; staying safe around tractors and equipment; attaching implements properly; and information about ROPS and SMV's. There will be time for questions.

Pre-registration requested by April 15, 2019 email Amy with your name, address, and phone number or call 585-394-3977 x 429.
Fee: $5.00/person. Class size is limited.

2019 Pastured Poultry Seminar, lunch included so please register by May 10th! $25/person

May 18, 2019
Registration begins at 8:00 a.m.w/ coffee & donuts with the Program running from 9:00 a.m. - 5 p. m.
Attica, NY

The main speaker this year is Eli Reiff of Mifflinburg Pennsylvania. Eli raises broilers, turkeys, sheep, and beef, all on pasture. Topics to be covered will include the pasture, feed and nutrition, marketing, costs, and much more. As we grow as farm operators and get bigger, we may not pay as much attention to the basics as we should. So those areas are where we will start, and then expand to cover the group's interests.

Mike Badger, Director of the American Pastured Poultry Producers Association will also be available for a round-table discussion. Plans are to have representatives from Farm Bureau, NYCAMH for farm health and safety, Wyoming County Chamber of Commerce, and Cornell Cooperative Extension of Wyoming County, as well as others.

Calling all 9th-12th graders! 4th Annual Precision Agriculture Day at Genesee Community College

May 21, 2019
9:00 am - 1:30 pm Register by Friday May 10th! $15/per person includes lunch
Batavia, NY

Calling all 9th-12th graders!  We have an exciting new program for students interested in technology, science, engineering, and agriculture!
Would you like to:
  • Learn about how Drones collect information
  • Check out some potential career opportunities that have new and ever-changing technology
  • Learn how these technologies can be used in our own backyards in WNY
  • Discover potential and exciting career opportunities

Announcements

Producers Previously Enrolled in the LGM Program Now Eligible for MPP

Dairy Producers Previously Enrolled in the Livestock Gross Margin Program Now Eligible for 2018 Margin Protection Program
The U.S. Department of Agriculture (USDA) today announced that dairy producers who elected to participate in the Livestock Gross Margin for Dairy Cattle Program (LGM-Dairy) now have the opportunity to participate in the Margin Protection Program for Dairy (MPP-Dairy) for 2018 coverage. Sign-up will take place March 25 through May 10, 2019.
Eligible producers can enroll during the sign-up period at their local USDA service center. To locate your office, visit farmers.gov.


Smart Farming Team Technical Assistance Grant Application

The Labor Ready Farmer Project is offering grants to provide up to 12 hours of Technical Assistance (TA) consulting services to farms who want to make improvements to their farm's processes in hiring, training, managing or evaluating employees. Applicants will choose from one of the following four areas for TA assistance and identify a specific project. If selected they will be matched with a "Smart Farming Team" of consultants who will provide one on one technical assistance.
  • HIRING EMPLOYEES 101 - GETTING OFF TO A GOOD START
  • ONBOARDING & TRAINING EMPLOYEES QUICKLY AND EFFECTIVELY
  • FINE-TUNING & IMPROVING THE WORKING ENVIRONMENT
  • H2-A READINESS
Please complete this application and send to Nicole Waters, Beginning Farm Project Coordinator for the Cornell Small Farms Program. The form can be submitted by email, mail or in-person at the address listed below. Please feel free to call or email with any questions.

Nicole Waters - Beginning Farmer Project Coordinator
Plant Science Building, Room 15b
Tower Road, Cornell University
Ithaca, NY 14853
Phone: 607-255-9911
Email: nw42@cornell.edu

Applications accepted on a rolling basis.



USDA Announces January Income over Feed Cost Margin Triggers First 2019 Dairy Sa

WASHINGTON, March 6, 2019 ? The U.S. Department of Agriculture's Farm Service Agency (FSA) announced this week that the January 2019 income over feed cost margin was $7.99 per hundredweight, triggering the first payment for eligible dairy producers who purchase the appropriate level of coverage under the new but yet-to-be established Dairy Margin Coverage (DMC) program.

DMC, which replaces the Margin Protection Program for Dairy, is a voluntary risk management program for dairy producers that was authorized by the 2018 Farm Bill. DMC offers protection to dairy producers when the difference between the all milk price and the average feed cost (the margin) falls below a certain dollar amount selected by the producer.

Agriculture Secretary Sonny Perdue announced last week that sign up for 
DMC will open by mid-June of this year. At the time of sign up, producers who elect a DMC coverage level between $8.00 and $9.50 would be eligible for a payment for January 2019.

For example, a dairy operation with an established production history of 3 million pounds (30,000 cwt.) that elects the $9.50 coverage level for 50 percent of its production could potentially be eligible to receive $1,887.50 for January.

Sample calculation:
$9.50 - $7.99 margin = $1.51 difference
$1.51 times 50 percent of production times 2,500 cwt. (30,000 cwt./12) = $1,887.50

The calculated annual premium for coverage at $9.50 on 50 percent of a 3-million-pound production history for this example would be $2,250.

Sample calculation:
3,000,000 times 50 percent = 1,500,000/100 = 15,000 cwt. times 0.150 premium fee = $2,250

Operations making a one-time election to participate in DMC through 2023 are eligible to receive a 25 percent discount on their premium for the existing margin coverage rates.

"Congress created the Dairy Margin Coverage program to provide an important financial safety net for dairy producers, helping them weather shifting milk and feed prices," FSA Administrator Richard Fordyce said. "This program builds on the previous Margin Protection Program for Dairy, carrying forward many of the program upgrades made last year based on feedback from producers. We're working diligently to implement the DMC program and other FSA programs authorized by the 2018 Farm Bill."

Additional details about DMC and other FSA farm bill program changes can be found at farmers.gov/farmbill.


New Guidance for Mortality Disposal Issued

NYS Department of Ag and Markets has posted guidelines on disposal of livestock carcasses, in response to reports that some rendering companies have halted pickups from farms.

https://nwnyteam.cce.cornell.edu/submission.php?id=761&crumb=dairy|1