Grow It or Buy It?
Most farmers have experienced the haying side of the agriculture industry, whether they have grown and harvested it themselves, or purchased it from someone who has done so.
But which option is better?
Growing Hay: Many large farms with expansive acreage will grow and harvest their own hay. But for a smaller producer with more limited acreage and income, that may not always be an option. “The two largest costs in hay production are fertilizer and the cost of owning the equipment used in hay production. These costs can certainly be prohibitive for smaller producers,” said Myriah Johnson, Ph.D., with Noble Research Institute Agricultural Economics. “Producers must calculate their own cost of production. If they cannot produce it cheaper than they can buy it, it is cost prohibitive.”
“Even in cases where some aspects of the farm may support growing your own hay, the opportunity cost is too high and buying hay can allow better use of time and equipment to focus on more profitable portions of the farming operation,” said Travis Meteer, Extension Educator, Commercial Agriculture with the University of Illinois Extension Center.
There are, however, a few pros to growing your own hay – if you have the excess land and the production costs are right. Not only can you feed your own cows, but if there is a demand for hay, you can diversify your farming operation and potentially increase your operation’s revenue stream by selling it. There is also the potential to share the haying equipment cost with other enterprises on the farm. Again, producers should calculate their production costs to determine whether growing their own hay is feasible.
Buying Hay: Buying hay seems to be the avenue many farmers are taking. While it requires the capital to purchase the hay up front, there is no continued cost to maintain haying equipment or to purchase inputs for the entire hay season. Buying hay also requires less time invested by the farmer, and generally removes the cost of labor from the equation.
If the farmer has been growing hay, it is advantageous to restructure the operation so the hay can be bought elsewhere. “Diverting hay ground to managed pastures can be beneficial to a farm,” said Meteer. “Managed pastures allow longer grazing seasons, can allow increased herd size or stocking rates, and can result in lower fertilizer and fuel needs to support the cattle operation.”
If the producer does choose to purchase hay, there is the consideration of where to buy from – should one buy hay locally, or have it shipped? The quality of the hay will be the determining factor. “the quality of hay is of the utmost importance. All hay should be tested before purchase,” said Johnson. “To start, hay should be compared on a dry matter basis. Hay value is based on crude protein (CP) and total digestible nutrients (TDN). Adjusting hay price based on nutrient values allows a producer to make an apples to apples comparison. So, once hay price has been adjusted taking nutrient value into account, a producer can then evaluate whether it is still more cost effective to have hay shipped in or purchase it locally.”
Bottom Line: Regardless of whether hay is grown or bought, producers should determine the hay market for their area. The USDA Agricultural Marketing Service publishes hay reports weekly, and producers can find reports for their area. Familiarizing themselves with these reports can help producers get an idea of hay prices.
Making the decision to grow or buy hay should be based upon each individual farmer’s production costs.
“To determine whether it is more cost efficient to produce or buy hay, producers must first know their own cost of production. Second, not all hay is equal. Hay that is produced or purchased should be tested and compared on a dry matter basis. Using the results from a hay test, producers can adjust hay prices so they can be compared to their own adjusted cost of production. Then, a producer can determine whether it is more cost effective for them to grow their own hay or purchase it,” stated Johnson.