With hay inventories at all-time lows, are you charging a competitive rate? What is a fair price to charge for hay? Are you still making a profit on your hay sales with rising input cost? Those making hay should consider the recent market changes, long-term trends, and personal enterprise cost to make sure their hay is priced fairly and competitively.
Let’s take a look at some of the hay numbers, both nationally and at the state level, as well as some tools to help hay producers fully reconcile their input cost.
National Hay Inventory
Last December the USDA reported that hay inventories in the United States were at approximately 71.9 million tons. This was a decrease of 7 million tons from the year before, roughly a 9% difference. This follows the trend over the last 20 years of decreasing hay stocks and has put us at the lowest hay inventory in over 70 years. The low inventory is likely to keep average hay prices high across the nation, but prices are often dictated by the supply and demand at the regional level.
Local Hay Inventory
While eastern Ohio and western Pennsylvania have seen some uptick in hay production recently, the two states are still historically low. Our region is also seeing a continued increase in equine hay demand. Compared to other regions in the country our numbers are somewhat stable, though declining, and our prices have not jumped as significantly as other states.
In Ohio, hay production was down slightly from the year before, 2.2 million tons from 2.3 million tons, but still slightly higher than the 40-year low it hit in 2020, 2.1 million tons.
Ohio has seen an almost 50% decline of hay production from the late 80s and early 90s where the state was producing around 4 million tons per year. The decline can be credited to many changes seen over that time. The type of agriculture seen in state, more row crop production and larger grain fed livestock operations has played a role in the decrease in hay being made. In recent years, weather has been a limiting factor as well, too much or too little rain has decreases yields.
In Pennsylvania, a slightly different story. While production has dropped over the last 40 years like Ohio, PA has seen moderate increases over the last 5 years. In 2018 the state produced just 2.7 million tons of hay, and just last year is now up to 3.7 million tons. While not yet back to the 5 million ton mark the state hit in 2008, hay production seems to be trending upwards in the Keystone State.
One of the major factors in a regional hay market is often the weather. When the weather cooperates, our region can make some top quality forages. Recently, at least in my county, producers are having to deal with shorter and shorter windows to harvest dry hay.
It is important to know the local and broader trends in hay production to determine what a fair asking price is. Another way to judge your local market is to see what local auction prices are and what other similar hay producers are charging. All of these factors are important to consider so that the price you decide to sell hay for is fair and competitive.
Ultimately, the most important aspect to consider is your own cost of production. By knowing your cost to make hay on a per bale basis, you can determine the breakeven price you would need to receive. Just because the market price is fairly standard across your area, doesn’t mean that price makes financial sense in your operation. Taking a look at your input cost can help you make important decisions, not just with pricing, but with management decisions. Some decisions include choosing whether or not to plant more hay, planting a more profitable crop or renting the land to another operation.
When calculating your input cost of making hay, it can be easy to overlook certain cost. Producers often do not factor in their time/labor that the enterprise requires. Another cost that is easy to overlook is the fixed cost, such as the loan payments on the land, taxes, equipment, buildings to store the hay, etc. With inflation causing input costs to rise each year (look at twine price over the last few years), you may be underestimating your own cost. One way to better account for these cost is by filling out an enterprise budget.
Ohio State Extension has some great enterprise budgets in most crops, including specialty crops and hay. The budgets are in excel and include easy instructions and automatic formulas that help calculate cost. Grass hay and alfalfa hay production budgets are available for you to download and use free of charge at https://farmoffice.osu.edu/farm-management/enterprise-budgets.
These budgets have many places to input cost, both fixed and variable. Budgets can be used before the hay season to estimate cost, and after harvest to calculate your actual cost. Some other state Extensions that have good hay enterprise budgets are North Carolina, Wisconsin and Kentucky. If you have any questions or issues with using one of these budgets, contact your county extension educator.
So, what is a fair price to charge for your hay? Like so many answers in economics, it depends. It depends on what the regional price is, what the customer is willing to pay, the quality of your hay, and how much it cost you to make it. Hay stocks are at an all-time low and input cost have gone up significantly in recent years. Have you raised what you charge for hay in the past few years to match these changes? By paying attention to the price of hay, the trends in the market, and knowing your input cost, you can feel better about charging a fair price.
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