The greening of pastures and the rising of temperatures have led ruminant-livestock owners to start thinking about the upcoming haying season.
“Because hay is a relatively inexpensive feed when grass is unavailable, many livestock owners want to produce hay for the winter from the abundance of grass that their pastures yield in the spring,” said Whitney Wiegel, University of Missouri Extension agriculture business specialist.
Some farmers own and operate their own hay equipment. Others use a custom baler or purchase hay.
“To evaluate the cost-effectiveness of owning and operating hay equipment, a livestock owner needs several pieces of information,” Wiegel said. “First, he needs to know his costs of both owning and operating a fleet of hay machinery.”
Machinery ownership costs include depreciation, insurance, interest and property taxes.
“These costs depend upon the market value of the equipment, how each equipment purchase is financed, insurance costs and property tax rates,” he said. “Machinery ownership costs are often prohibitive when equipment is not used to its full capacity or when the hay produced has little value.”
Machinery ownership costs are relatively fixed in the short run, meaning that no matter how much hay is baled, ownership costs do not change for the hay enterprise. But when calculating production costs for each unit of hay produced, these costs are spread out over all units of production. “Therefore, the situation of owning hay equipment is made more favorable when the volume of hay produced with the equipment can be increased,” Wiegel said.
Operating costs also affect the cost-effectiveness of baling hay. Operating costs include labor, fuel, maintenance and repairs due to equipment use.
“These costs are considered variable costs because the cumulative dollar value of these expenses will vary with the quantity of hay baled,” he said. Like ownership costs, these costs are, theoretically, spread across all units of production.
“Dividing the total ownership and operating cost by the units of hay baled provides a dollar value that signifies the ownership and operating costs embodied in each unit of hay,” he said.
After calculating the machinery ownership and operating costs per unit of hay, producers can compare their costs to the going custom rate for hay baling.
“When a hay producer’s machinery ownership and operating costs are less than the custom rate, it is cost-effective for the hay producer to bale his own hay,” Wiegel said. “When his costs are greater than the custom rate, he should consider hiring a custom baler.”
(by Milly Carter, Administrative Associate, West Central Region, University of Missouri Extension)
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