Here’s A Tool For Running Your Own Numbers For Negotiating A Fair Price
Posted: August 21, 2015
Extension Agronomist Greg Roth points out to determine a price we first need a yield estimate. Yields can be estimated in a variety of ways. One is to weigh the silage or count the loads of silage that are exchanged. Another is through a kernel count method to estimate the potential grain yield and then converting to tons per acre using a grain equivalent of about 7.5 bu/ton. This number can vary depending on how well eared the crop is and other factors.
Then we have to look at the issue from two perspectives. From the dairy producer’s perspective, the crop should be worth something similar to what the corn grower would get from shelling, drying and hauling the grain to market, plus some compensation for the P and K removed in the silage harvest. Current prices for P2O5 and K2O are about 0.49 and 0.43 dollars per pound.
From the corn growers perspective, the crop should be worth what an equivalent feed price would be worth, adjusted for the harvest and storage costs associated with getting it to that condition. This could be arrived at by finding out what cured silage could be delivered for or what the value of the corn silage is based on other feeds. I have seen estimates of 45 to $55/ton for the cured feed value. The final price should then be negotiated between dairy producer and corn grower estimates.
We put together a spreadsheet available on the Penn State Extension Farm and Food Business website to enable you to do some of your own estimates. This includes some of the factors above, plus current corn prices, and potential discount for grain or silage quality if either would be impaired. We also use a feed value as the market price of corn silage delivered from a silo. We will be updating with some current prices this week, but you can use some of your own numbers to get an idea of what might be appropriate. Based on few scenarios we have run we are looking at value between $24 and $35/ton for the standing crop in the field.
(Contributed by Leon J. Ressler, District 17 Director as part of his Now Is The Time Column for August 22, 2015.)