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Pricing Corn Silage -- Fall 2018

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

September 10, 2018
Pricing Corn Silage -- Fall 2018

Determining Corn Silage Price

A farm business owner can examine how much corn silage he/she would be willing to supply to a market at a given price.  Analysis of the farm business' cost structure for corn silage production combined with consideration of other factors help 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.  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.

Although factors in price determination, the two approaches described above in isolation, don't completely determine 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.  The ordinary least squares regression model here expresses corn silage price as a linear function of the above variables.  The analysis is somewhat rough, elementary.  However, readers of the original August 2012 Ag Focus article describing this work, and readers of annual update articles note that the analysis and estimates help farm business owners price corn silage.

Corn Silage Price Estimates - Fall 2018

The ordinary least squares regression model reported in August 2012, updated here to reflect additional data available to date and changes in other underlying factors, produced corn silage price estimates for NY.  Below, estimated corn silage price is a function of alfalfa hay price and corn grain price with other factors (corn silage production and milk price) fixed at expected levels.  Expected corn silage quantity is set at 8,311 tons, the average for the period 2007 through 2016.

  • estimated corn silage price ($/ton) = -0.1445 + (0.1730 x price of alfalfa hay ($/ton)) + (3.3828 x price of corn grain ($/bushel))

Suppose

  • NY alfalfa hay price is $161 per ton, the three month average of the period May, June, July 2018. (USDA/NASS.  Agricultural Prices. Washington, DC:  National Agricultural Statistics Service.  July 30 and August 29, 2018 releases), and
  • corn grain price is $4.00 per bushel (Western NY Energy.  "Corn Bids." August 14, 2018.  Approximate value based upon reported bids for fall 2018.)

Using the estimating equation and the above prices for alfalfa hay and corn grain, estimated corn silage price is about $41 per ton.  Compare this to last fall's estimate of about $54 per ton.  Suppose alfalfa hay price is $175 per ton, the annual average for the period 2007 through 2016, and expected corn grain price is 4.00 dollars per bushel, then estimated corn silage price would be $44 per ton.  Buyers and sellers use an estimate as a base, typically, adjusting for quality and, or costs for harvest, hauling and storage based upon the situation, for example, when pricing standing corn for silage. 

Corn silage price estimates combined with understanding of relevant supply and demand factors from the individual farm business owner's perspective, including local conditions, for example, growing conditions, can aid decision making regarding corn silage price.

 




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Upcoming Events

AGROTOURISM - FREE FARMER TRAINING! ENROLL and GROW YOUR BUSINESS

May 9 - March 1, 2020

Rochester, NY

Expand your farm operations by starting Agritourism, either as your primary or as an add-on activity on your farm. Increasing your farm visibility, connecting with the community, educating the public, creating new local markets, sharing your knowledge and pride - these are just a few attributes that come with Agritourism.

We are inviting all farmers in the Genesee Valley Region (Genesee, Livingston, Monroe, Ontario, Orleans, Steuben, Wayne, Wyoming, and Yates) to enroll in this FREE Agritourism Farmer Training program.  
The class size is limited.  We are looking for a group of 10-12 farmers to teach them how to successfully develop and execute Agritourism events in their farm and grow their business.

The training is funded by the Genesee Valley Regional Market Authority in support of local farmers, agriculture and food industry. 


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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

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Human Resource Management on the Farm - 2 sessions! Register by Friday 5/17!!

May 21 - May 22, 2019
12:00 - 2:00 pm (2 sessions! Day 1 CCE- Ontario, or Day 2 CCE - Wyoming)

Are you looking for motivation and resources to implement new Human Resource Management practices on your farm?

Join us for one of two sessions in WNY this spring. At each session, we'll discuss:

  • What Human Resource Management is, and why it's important on your farm
  • Examples of different Human Resource Management practices and how to implement them
In addition, you will:
  • Complete a self-assessment to determine the areas of highest priority for your farm
  • Hear from several local dairy farmers who have recently implemented new HRM practices on their farms.
  • Go home with a plan of action and resources to help you accomplish your HRM goals

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Announcements

USDA Announces New Decision Tool for New Dairy Margin Coverage Program

WASHINGTON, April 30, 2019 ? Agriculture Secretary Sonny Perdue announced today the availability of a new web-based tool - developed in partnership with the University of Wisconsin - to help dairy producers evaluate various scenarios using different coverage levels through the new Dairy Margin Coverage (DMC) program.

The 2018 Farm Bill authorized
DMC, a voluntary risk management program that offers financial 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. It replaces the program previously known as the Margin Protection Program for Dairy. Sign up for this USDA Farm Service Agency (FSA) program opens on June 17.

"With sign-up for the
DMC program just weeks away, we encourage producers to use this new support tool to help make decisions on participation in the program," Secretary Perdue said. "Dairy producers have faced tough challenges over the years, but the DMC program should help producers better weather the ups and downs in the industry."

The University of Wisconsin launched the decision support tool in cooperation with FSA and funded through a cooperative agreement with the USDA Office of the Chief Economist. The tool was designed to help producers determine the level of coverage under a variety of conditions that will provide them with the strongest financial safety net. It allows farmers to simplify their coverage level selection by combining operation data and other key variables to calculate coverage needs based on price projections.

The decision tool assists producers with calculating total premiums costs and administrative fees associated with participation in
DMC. It also forecasts payments that will be made during the coverage year.

"
The new Dairy Margin Coverage program offers very appealing options for all dairy farmers to reduce their net income risk due to volatility in milk or feed prices," said Dr. Mark Stephenson, Director of Dairy Policy Analysis, University of Wisconsin, Madison. "Higher coverage levels, monthly payments, and more flexible production coverage options are especially helpful for the sizable majority of farms who can cover much of their milk production with the new five million pound maximum for Tier 1 premiums. This program deserves the careful consideration of all dairy farmers."

For more information, access the tool at fsa.usda.gov/dmc-tool. For
DMC sign up, eligibility and related program information, visit fsa.usda.gov or contact your local USDA Service Center. To locate your local FSA office, visit farmers.gov/service-locator.


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

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