What is the value of corn silage?
"What is a fair price for corn silage?" is a common question. The best answer is: "Whatever price the buyer and seller can agree on." But that is sometimes easier said than done.
With the ever-changing cost environment, it can seem hard to come up with a "fair" price for both parties. Does the traditional method of pricing corn silage -- multiplying the price of a bushel of corn by 7 to 8 still hold true in today's market with much higher crop values and higher harvesting costs? This traditional formula was simply based on the average amount of corn grain that a ton of corn silage contains.
With more dairy producers purchasing standing corn silage, they are looking for a more accurate way to determine a value based on its feed value. Fortunately, with today's more sophisticated forage tests it is easier to estimate the feeding value of corn silage. It is important that both buyer and seller approach the negotiation with a good faith effort and an attitude that both parties need to win for a successful long-term relationship.
For the seller, a starting point is to value standing corn silage based on the value of the corn minus the cost of harvesting, drying and hauling to market. For the buyer, a starting point should be the value of nutrients compared to alternatives. Since corn silage is a combination of corn grain and stover (leaf and stem material) it makes sense to determine the monetary value based on the nutritional value of corn grain and a similar stover forage like straw or grass hay minus the harvesting cost and storage shrink. These two values provide a window to begin negotiation between the buyer and seller.
University of Minnesota dairy nutritionist Jim Linn developed a formula taking into account the nutritional content of corn silage. This formula is based on the starch content of the corn silage and places a value on the stover portion as well. It also includes an adjustment for NDF digestibility if that is known.
Sterry, Milligan, and Lauer at the University of Wisconsin developed an easy to use spreadsheet and further refined the formula to adjust for harvesting costs, shrink, quality adjustment and the fertilizer value of the harvested stover. The results are two different values per ton.
One is the minimum value for the seller based on the value of the corn and stover adjusted for harvesting costs. The other is the maximum value that the buyer should pay based on feeding value and the cost of harvesting. This provides an excellent starting point for negotiating a fair price.
The spreadsheet is titled "Corn Silage Pricing Decision Aid" and is available at: www.uwex.edu/ces/crops/uwforage/Silage.htm.
Using typical corn silage values along with current grain prices and estimating the other costs, the current value of standing corn silage was between $38 and $49 per ton, according to the spreadsheet. Surprisingly the old tried and true equation that a ton of standing corn silage is worth about 7-8 times the price of a bushel of corn is very close to this number.
There are other factors that may affect the final agreed upon price. If the dairy producer provides manure back to harvested fields the price should be adjusted. This is currently not part of the spreadsheet. What will the payment terms be - cash up front, or monthly payments made during the year?
When will the value of corn be determined? To develop a successful long-term relationship between buyers and sellers, it must be a win-win situation for both. The seller's corn crop will be harvested earlier and harvesting, drying, and hauling costs will be eliminated. The buyer will acquire a consistent supply of high quality feed at a fair price.
If we end up with an early frost, all of the calculations for pricing corn silage based on grain value go out the window, and pricing will be based on demand and supply. If you need more help in determining a fair price, work with your nutritionist or call your local extension office.
A source for this information was Jim Salfer, University of Minnesota Extension Educator, Dairy Production, U of M Regional Center in St. Cloud. For more information feel free to contact me: Will Yliniemi, Hubbard/Becker County Extension Educator at 1-218-732-3391, 1-218-846-7328 or by cell at 1-218-252-1042, or by e-mail at firstname.lastname@example.org.