Help with Hay
May 02, 2012
My name is Erik and I am a hay producer, cattleman, and I work in feed/fertilizer sales. My biggest problem in hay marketing is to try and educate customers about quality. I grow hay in southwest Louisiana and alfalfa is impossible to grow, so bermudagrass is the forage of choice for quality hay production.
In order to make quality hay, fertilizer is essential, and it needs to be applied for each cutting. Some producers will fertilize once at the beginning of the season with a minimal application, but then mislead customers by calling their 2nd & 3rd cuttings of hay fertilized and selling at prices that seem ridiculously low. I find it quite aggravating but don' t know what to do about it, so like any good farmer I sharpen my pencil and warm up my calculator to figure my breakeven as best I can. Upon estimating my breakeven price, I decide how to shave the margins down and try to be competitive.
I know that is what everyone has to do in agriculture, but with wild variations in product and no possibility of a standard pricing method, it can make you pull your hair out. I am truly surprised that more farmers aren't bald.
P.S.: On a lighter note, I watch the show weekly and love it. I greatly appreciate all aspects of the show. Ya'll have a great day and keep up the good work.
Editor's Note: Below is a transcript of John's Mailbag comments (aired April 29-30, 2012) on the difficulties of analyzing the hay market.
TIME NOW FOR OUR WEEKLY LOOK INSIDE THE FARM REPORT MAILBAG...
RICHARD PETERS IS IRKED WE DON'T COVER HAY PRICES BETTER.
"SINCE I AM A HAY PRODUCER, I WATCHED THE PROGRAM EAGERLY TO SEE INFORMATION ON HAY PRICES. WHY SHOW A SUBJECT ON THE INTRO IF YOU DO NOT INTEND TO COVER IT IN THE PROGRAM?"
RICHARD, I TRY TO ADDRESS THE HAY PRICE ISSUE OCCASIONALLY SINCE YOU ARE NOT THE FIRST HAY GROWER OR BUYER TO EXPRESS FRUSTRATION TRYING TO GET HAY PRICE INFORMATION.
BUT HERE IS THE PROBLEM FROM OUR PERSPECTIVE. HAY IS NOT A UNIFORM PRODUCT. THE QUALITY AND CONTENTS CAN VARY WILDLY, WHICH MAKES THE PRICE RANGE ALMOST MEANINGLESS. FOR EXAMPLE, I CHECKED CURRENT PRICES FOR ALFALFA HAY IN MISSOURI AND GOT A RANGE OF $100 TO $200 PER TON.
THEN YOU HAVE TO ADJUST FOR BALE TYPE, CONTENT AND QUALITY. THERE IS NO BENCHMARK EQUIVALENT TO #2 CORN, FOR EXAMPLE. AND AS USERS KNOW, MUCH, IF NOT MOST OF THE COST IS TRANSPORTATION.
HAY PRICES HAVE NO NATIONAL FUTURES MARKET TO BASE REPORTING ON, LIKE CORN OR MILK. RATHER, THEY ARE HIGHLY LOCALIZED NUMBERS.
OUR STORY TRIED TO CONVEY LAST WEEK HOW MUCH PRICES HAVE RISEN, NOT THE ABSOLUTE PRICE LEVEL. IN THIS CASE, HAY PRICES IN SOME REGIONS ARE ABOUT 50% MORE THAN LAST YEAR. SUCH COMPARISONS ARE ABOUT THE BEST WE CAN DO.
FINALLY, HAY IS TRADED BY THOUSANDS OF SMALL PRODUCERS AND BUYERS VIA INDIVIDUAL TRANSACTIONS WITH LITTLE PRICE REPORTING. HAY PRICES ARE MICROECONOMICS AT ITS BEST.