I have been noticing some complaints on the local Craigslist about how high hay prices are this year, and the price difference between Central Oregon and hay from the Valley. This post is meant to show why hay prices are as high as they are, and why it is justifiable. As a hay farmer, I am naturally biased, but this blog is intended to educate, and I will use numbers directly off my budget, and I welcome any readers who see any errors in my math to comment.
Before I jump into the math part of this post, there are other reasons why hay is high this year.
- Jump in commodity prices. This winter, wheat and corn to near all-time highs, and since farmers can lock in their price for their crop, many plowed under their hay acres in favor of other crops. This happened all over the country, not just in Oregon.
- Lack of carry-over stocks. Lots of hay got drenched last year, especially 3rd cutting in Washington. That meant premium hay was hard to get; dairies and feedlots had a hard time finding the quality hay needed for milking cows and feeder steers. Most farms don’t sell out until late winter, but this year, most everyone was sold out by December. That meant there were 6 months of VERY little hay on the market.
- Several years of historically low hay prices. Many hay farmers in Central Oregon face tighter budgets than other areas because of our shorter growing season. When prices drop, many farms barely get by. So when prices finally do climb, they climb pretty high, but usually drop back down after more acres are planted. Simple supply and demand principles.
So now I want to jump into the numbers of growing hay.
Below is a list of costs per acre assuming the hay is put up in 80# small bales and three cuttings with a total yield of 5 tons per acre.
- Power $80
- Fertilizer $250
- Harvesting $195 ($65 per acre per cutting)
Total = $525 per acre, and that is not counting the cost of water delivery, cost of the land, or all the hours spend irrigating. Those costs differ greatly between farms.
If the yield is 5 tons an acre, at $200 per acre, that is $1000 an acre. $1000 – $525 = $475 an acre – cost of the land, water, and irrigating labor. So lets say the hay grower makes $200 an acre, if he farms 100 acres, his profit is $20,000 for the whole year. In order to make that profit, the grower spend $52,500 in costs. Not exactly a great business plan. However some areas have better yield, such as Culver and Madras, but overall, the profit is very small compared to the amount of capital the farmer has into the hay. But its true, hay farmers will make money this year, will we get rich? Hardly. But the $20,000 payment on the baler will sure look less scary….
Some have commented on how much cheaper hay that is grown in the valley is. (The “valley” being land on the west side of the Cascades.) Hay grown in the valley has the advantage of being irrigated primarily by rain, which saves farmers a lot of money, and that is reflected in the lower prices. However valley hay is usually lower quality, both in palatability and nutrition content.
I understand that it is hard to swallow coughing up $200 a ton for hay to feed horses, but the prices are set for a reason. Yes, farmers will make money this year, but remember that we are farming for a profit. We have huge amounts of capital tied up in our crop and we deserve to make a return on our investment.
If you have any thoughts on this, please comment!