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There are pluses to buying forages

Agrivision: Purchasing forages may help you become more productive and efficient.

October 10, 2019

8 Min Read
aerial overview of farmsteads and green fields
GREATER FLEXIBILITY: Purchasing forages rather than growing them yourself would allow you to spend more time on your livestock production system.

My son and I milk 250 cows and farm 275 acres in southwestern Wisconsin. We added a few cows this year and we were hoping to rent 75 to 100 acres of land, but there is so much competition in our area for land it is impossible to find land to rent. We have talked to a neighbor who feeds out beef cattle and raises a lot of corn silage and haylage, which he sells to area farmers, and it seems like what he is asking for silage and haylage per ton is more reasonable than renting more land. We wouldn’t have to buy more or bigger equipment, or hire more help, and the feed is very high quality. Fortunately, we have extra feed from last year, but now we have to decide what to do. I haven’t read much about buying forages. Please advise.

Doug Hodorff: From your information, buying forages from your neighbor seems reasonable. If you are looking at how to value forages, you should work closely with your nutritionist. When buying forages, quality is always the important factor to consider. It is best to purchase forages on a dry matter basis. Other factors to consider would be if the forage is delivered to your farm, does every load get scaled, check dry matter often and is the forage always fresh. If you decide to buy forage, I would suggest you have an agreed plan of sampling and testing. Then both parties know who is sampling and which lab is analyzing samples.

Sam Miller: Buying forages can be a great solution for your additional feed needs. You will be purchasing what you need without the additional investment in equipment and labor, and you will eliminate growing risk. Extension has several publications to assist in pricing forages; contact your ag agent or search “corn silage calculator” on their website to access these publications. As a general rule, a ton of corn silage is priced at seven to eight times the price of corn as standing in the field. The challenge is what price of corn to use — most use the average of the local elevator bid and ask at harvest. Haylage costs are more difficult to calculate, but most use a comparison to dry hay prices. Researching these sources can assist in negotiating an equitable deal with your neighbor. 

Katie Wantoch: Buying forage has been done for decades in all parts of the country. The secret to success is knowing how much you need to purchase and what you are going to be getting (i.e., quality). While it is hard to predict how much feed is needed over winter, doing a feed inventory establishes your current stock of various feed ingredients.

Brian Holmes, University of Wisconsin-Madison emeritus professor, recommends a process that involves determining the volume of each feed stored and then multiplying by the stored density to yield a weight of feed. For example, silage in a bunker silo has a dimension of 30 by 10 by 50 feet. Its volume is 15,000 cubic feet. If the silage has a stored density of 40 pounds (as fed) per cubic foot, the weight of feed in the bunker is: 15,000 cubic feet times 40 pounds as fed per cubic foot equals 600,000 pounds, which equals 300 tons as fed. There are several ways to do a feed inventory: pencil and paper, computer spreadsheets or commercial software that integrates with your feed weighing system.

There are a number of publications and software tools that can help establish your feed inventory. Feed inventory management is slightly more complicated. With inventory management, you are predicting how long an ingredient will be available to feed and making adjustments accordingly. If the projected date to feed depletion occurs before a new crop comes in, you need to consider if you will reduce the rate of consumption to extend the feed ingredient, purchase more of that feed, substitute an existing feed ingredient into the ration or a combination of these choices.

There is no one best time to do an inventory. Completing your feed inventory in October or November allows you to make a projection to see if purchased feed will be needed or if the consumption rate needs to be adjusted. This allows needed purchases when commodity prices are apt to be lower in winter, and will allow purchases before Dec. 31, assisting in tax management. Be sure you have the latitude in cash flow to accommodate these larger feed expenditures.

I suggest you work with your neighbor on establishing a payment plan to allow you amortize over a specified time period rather than lump sum payments. Purchasing forages may allow you and your son to become more productive and efficient, with more time spent on your livestock production system.

Expanding FFA SAE project

I am a sophomore in high school. I help my dad milk our 80 cows. We have 200 acres of crops. I would like to expand my FFA supervised agricultural experience project from four dairy-beef calves and feed out 15 to 20 dairy-beef calves. I can buy these calves from my dad and our neighbor for $25 to $50 per calf. These calves are half Holstein, half Simmental. They are all black and look like beef calves. It takes me 18 months to get them to 1,200 pounds, and with current feed costs, I am making $250 to $350 per steer. I sell most of the steers by the pound as beef quarters and beef sides to family and friends. I have a website and a waiting list of people who want to buy my beef. What are your thoughts and concerns?

Doug Hodorff: Sounds like you have penciled out your profit margin. The FFA SAE projects are great learning experiences for young people. This will help you throughout your future. FFA, 4-H and other youth programs really lay a great foundation for young adults and their future endeavors. As you are figuring your margins, I hope you are including some costs for help from your parents and labor done by yourself and parents. When I do budgets, it seems I overlook some fixed costs such as property taxes or future upkeep on buildings, etc. Hopefully your success continues, and your business model is rewarding.

Sam Miller: It sounds like you have been successful with your project to date. There are several considerations to analyze before expanding your project. Start with the budget. While you mention the cost to purchase the animals, what about feed cost, facility rent, trucking, etc.? You may want to budget in some death loss, as well. Do you have the cash to be able to fund the growing cost until you sell the beef? 

Next, do you have a market for four to five times the amount of your current project? You may want to have commitments in advance of purchasing the calves. Will you raise the steers as a batch, or will you purchase a few animals on a quarterly basis to even out your marketings? Completing a budget and marketing plan and securing commitments for raising and selling will increase your chances of success. Good luck with your project.

Katie Wantoch: I’m excited to see that you are interested in expanding your FFA SAE project. It’s a great time for you to try out different projects to see which ones you feel are the best fit for you and your future in agriculture. Adam Hady, former agriculture agent in Crawford and Richland counties, recently wrote an article and shared advice on direct marketing. Selling meat directly to consumers is completely different from selling animals through commodity market outlets such as auctions, livestock sale yards or commission agents. The advantage to these outlets is that you drop off the animal and you get a check in return. The disadvantage is that you are a price taker, not setter, and may be leaving a few dollars on the table. This is why some producers are looking at direct marketing their beef right to the consumer. The good news is that more and more consumers are willing to pay a higher price to support farmers they know or who are using an alternative production system. 

Home-raised is a great way to connect with the typical direct market customer. They are really wanting to buy from a family operation, and “home-raised” tells the consumer the animal was raised where you live.  By virtue of its description, direct marketing involves taking out the middleman, and you become the price setter for the product. My only concern would be as you increase your head, do you have a larger market to sell to? Identify who your target customer is, what is your customer willing to pay and how you are going to set the price for your product? 

There are various tools available to help set price, and it all starts with knowing your cost of production. Keep in mind that depending on how you sell your product, you may need to work with a representative from the Wisconsin Department of Agriculture, Trade and Consumer Protection’s Division of Food Safety to make sure you comply with local and state regulations. Direct marketing beef has an opportunity to add value to your FFA SAE project.

Agrivision panel: Doug Hodorff, Fond du Lac County, Wis., dairy farmer; Sam Miller, managing director, group head of agricultural banking at BMO Harris Bank; and Katie Wantoch, Dunn County, Wis., Extension agricultural agent specializing in economic development. If you have questions that you would like the panel to answer, send them to: Wisconsin Agriculturist, P.O. Box 236, Brandon, WI 53919; or email [email protected].

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