Not sure how to come up with a fair price for your neighbor making your hay? Here are some things to consider.
By Andrew Frankenfield, Penn State Extension
I have had a number of discussions with farmers about how to fairly split the yield of a first cutting grass hay crop between the farmer of the hay field and another farmer who has the hay making equipment and uses for the hay. As you know this is not a question that has only one correct answer.
So by this time of year, early June, the grass hay still has good quality. But give it a few more weeks, and it will look more like straw in a bale than hay. I am very familiar with the challenge of making hay; there are limited opportunities to bale dry hay and if you are making small square bales you have limited wagons and sometimes even more limited willing workers to unload them. So, you can quickly get behind making first cutting hay. Then a neighbor offers to round or big square bale it for you while it still has some good feed quality. His cutting, tetting and raking equipment is better sized to the baler than yours so he does it all. Now how do you pay him? Some will use the custom rates and others will split the hay.
There is no right or wrong answer but here are some things to consider. If the custom operator gets a share of the crop they have a vested interest in getting the hay made timely.
Let’s assume a 2 ton yield of first cutting dry timothy hay (5 large square bales per acre). The equipment costs to cut, tet, rake and large square bale are about $77 per acre or $38.50/ton, based on the 2013 PA Custom Rates (see Table 1).
Table 1. 2013 Custom Haymaking Rates for PA
The nutrient value (fertilizer removal) of 2 tons of timothy hay is around $118 per acre or $59/ton:
N=$0.57/lb. x 50lbs. = $28.50
P205=$0.47/lb. x 15lbs. = $7.05
K20=$0.47/lb. x 50lbs. = $23.50
Also consider the establishment cost of that hay field which is at least $200 an acre including lime, seed, etc. Averaging 3 ton per acre for 4 years, that’s 12 ton. $200/12=$17 per ton.
Annual Maintenance $50/acre or $17/ton = Fertilizer spreading, spraying herbicide and miticide.
Land cost or rental value = $25, $50, $100 take your pick! (I’ll say $50 per acre per year which is $17 per ton)
If we add up all the costs not associated with cutting and baling you have $110 per ton invested before you start cutting. Add to that the equipment cost of $38.50 per ton and you’re up to about $150 a ton, and you haven’t even hauled it or stored it yet.
So how do you come to a fair agreement if you are going to share the hay with the person who made it for you? I would start the discussion at 1/3 to the custom operator and 2/3 for the farmer who is managing the fields. If the fields are not being managed aggressively and the yields is less than 2 tons per acre I would consider closer to a 50/50 split of the hay crop.
Looking at the PA Regional Hay reports in the paper this week, I see prices (from late May) for grass and timothy hay from $120-$225 per ton with a high of $340. It suggests to me that maybe all this work, hidden expenses and risk to bale dry hay isn’t as profitable as one might think.