Two Perspectives of Buying and Selling Standing Corn
Posted: August 24, 2012
Grain Grower’s Perspective
The goal of a grain grower selling standing corn is to net the same amount from selling standing corn as if harvesting shelled corn. To begin, estimate a per acre corn yield (estimated bushels (150) x price/bushel ($8) = $1200). From there, a cost per acre for harvesting, grain hauling (field to mill), and a drying charge need to be subtracted ($1200 - $40 - $38 - $90 = $1032). If desired, a cost for removed P and K from harvesting as silage can be added since removing the stover reduces nutrients left in the field ($1032 + $60 = $1092). Lastly, discounts for grain quality issues (smut, sprouting, etc) can be included to reach a chopped corn price per acre. Divide this number by potential chopped tonnage to get a price per ton. ($1092 / 20 T/a = $54.60/ton unfermented corn silage price)
Silage Buyer’s Perspective
The goal for the buyer chopping the corn into silage would be to pay the same as buying corn silage from a silo. To start, a current market price for corn silage from the silo (including delivery charges – i.e. $43/ton) would be needed. From this price, deduct estimates per ton for harvest costs, storage costs, and dry matter loss ($43 - $10 - $2 - $6.80 = $24). Finally, subtract off any possible quality discounts for overly dry corn, brown leaves, corn with small ears, or un-eared corn. This will result in an estimated price per ton of unfermented chopped corn needed to equal corn silage price delivered from a silo. The buyer should definitely not pay the price of “finished corn silage” for standing corn. Fermentation losses and storage costs can be significant and the buyer must absorb these costs when buying unfermented chopped corn.
To make these calculations easier, download a copy of the Excel Spreadsheet “Pricing Standing Corn for Silage” found at: http://extension.psu.edu/animals/dairy/business-management/spreadsheet-to-price-standing-corn-for-silage/view
This approach to pricing corn silage illustrates that the value of standing corn for silage varies widely depending on the potential grain yield and ultimately the starch content of the finished silage. Table 1 demonstrates how corn with different grain yield potential varies in value per ton. In the case of corn with only 25 bushels/acre grain yield potential, this corn might yield only 6.9 tons of corn silage. Using the method outlined above, this would equate to $26.99 per ton value. Well-eared silage with normal fodder development prices between $55-$58/ton using the same approach. On the other extreme, short, stunted corn with heavy ear development may produce silage with very high starch content but a low tonnage yield. This highly concentrated silage may be worth as much as $74/ton using the method outlined.
The take home message is to make your own calculations on the standing corn intended for purchase based on the quality of the corn. Consult the local Extension crops and soils educator to learn how to estimate corn grain production if uncertain of the potential corn grain yield.
|Table 1. The effect of corn grain yield potential on the value of standing corn for silage.|
|Bushels/Acre Grain Yield||Grain Equivalent Bu./Ton*||Silage Yield (T/A)||Corn Silage Value/Ton ($8.50 Corn)|
The other consideration is to look at how the price paid for silage impacts the daily ration cost for the milking cows. Table 2 takes the prices generated using the method outlined in Table 1 and examines how the starch level in the fermented corn silage affects the ration cost based on the need to supplement corn grain.
|Table 2. The effect of corn silage cost and starch level on daily ration cost.|
|CS Starch Level, %***||15||20||25||30||35|
|CS price/ton, $||26.99||50.67||55.76||58.34||58.85|
|Standard CS price/ton, $||45||45||45||45||45|
|Standard CS price/ton, $||80||80||80||80||80|
This comparison raises many interesting observations. An unexpected conclusion from this comparison (assuming equal milk production with the balanced diets) is that the lower priced drought corn silage is cheaper to feed than all other diets with higher priced corn silage. This suggests it’s very important not to overpay for this forage ingredient because the forage cost has a stronger impact than the added corn grain needed to balance the diet. While cows may not react well to the 17.5 lbs. of corn grain needed to balance this low starch silage, this conclusion underscores the dairy producer’s need to not overpay for standing corn that will result in low starch corn silage. If $45 or $80/ton is paid for this same forage the cost per day goes up to $6.84 and $7.54 respectively. Another idea would be utilize this poorly eared silage for just the dry cow and heifer rations where low energy forage is desirable. Storage could be a challenge, but a small bunker or bag could work nicely for these animal groups. The higher energy forages could be allocated to the milking cows.
Another issue of concern is simply paying a high price for standing corn because the “local market talk” suggests standing corn should be high priced because corn grain is valuable. Paying $80/ton for corn silage increases daily ration cost an average of $0.60/cow/day compared to the method that prices the forage based on potential grain yield. This is $43,800 more annual cost for a herd of 200 milking cows.
A final observation is that while the differences between the starch levels is pennies per cow per day, the larger gain to the producer’s cash flow enters the picture when the corn silage and corn grain needed is grown versus purchased at high market prices. The 70 farms in our cash flow group for 2012 could grow corn silage for $30/ton and corn grain for $2.70/bushel. Compared to $80/ton for corn silage and $8.50/bushel for corn grain, the lower farm-raised costs provide major dollar impact to a dairy farm’s cash flow.
Think carefully before agreeing to a high price for standing corn. Be sure the quality of the corn is known before purchasing and ask for assistance to run through the calculations before negotiating a price.
- Extension Associate, Penn State Extension, Department of Animal Science
- Nutrient Management Specialist