Due to the fact that hay is relatively an inexpensive feed when grass is available, many livestock owners like to have an abundance for the winter. According to University of Missouri Extension Agriculture Business Specialist says depending on the situation it could be more cost effective for landowners to produce their own winterfeed. If landowners can get the their operating cost below the custom rate of baling in their area then it would make sense to do it themselves.
Click below to listen to KMZU’s Mandy Young talk with Ag Business Specialist Whitney Wiegel:
Is it cost-effective to bale your own hay?
By Whitney Wiegel, Ag Business Specialist
(BLUE SPRINGS, MO ) Warm temperatures and intermittent rain showers have awakened Missouri pastures earlier in 2012 than in most previous years. The greening of pastures and warming temperatures have triggered 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. In order to obtain hay, some farmers choose to own and operate their own hay equipment. Others choose to use a custom baler or purchase hay. This article discusses the costs effectiveness of owning and operating hay equipment versus hiring a custom baler.
In order to evaluate the cost-effectiveness of owning and operating hay equipment, a livestock owner needs several pieces of information.
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 are dependent upon the market value of the equipment, the manner in which each equipment purchase is financed, insurance costs, and property tax rates.
Machinery ownership costs are often prohibitive when equipment is not utilized 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 the amount of hay baled, ownership costs do not change for the hay enterprise. However, 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.
In addition to ownership costs, operating costs affect the cost-effectiveness scenario 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. Like ownership costs, these costs are, theoretically, spread across all units of production. Adding ownership and operating costs together, produces a dollar figure that equals the total cost of owning and operating the given set of hay equipment.
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.
After a hay producer has calculated his machinery ownership and operating costs per unit of hay, he can compare his 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.
When his costs are greater than the custom rate, he should consider hiring a custom baler.