Hay – does it stack up?
Author: Greg Toomey (Landmark Elmore) | Date: 10 Mar 2016
Introduction
When I’ve spoken to other agronomists or growers about hay as an enterprise I have often used a scene out of the Monty Python film, The Life of Brian, as an analogy.
A small group of local Judean subversives are in a room plotting to overthrow the Romans. Their leader Reg says that “the Romans have bled them dry, and what have the Romans given us in return!”
The other rebels then reel off “The aqueduct, sanitation, roads, irrigation, medicine, education, wine, public baths, public order, the fresh water system and peace”.
To me hay is a bit like the Romans.
So what has hay done for some of my growers?
- reduction in weed burden
- less input costs
- rotational flexibility
- timing of sowing flexibility
- early income – less time in the red
- experience of cutting crops which were sown with the intention to be harvested for grain
- dry finish/frost mitigation
- more stored soil moisture after hay than after a grain crop
- disease break – Take-all
- ease of sowing the following year
- seeder flexibility – discs.
Other than this extensive list of agronomic advantages my growers have gained from having hay in their system, from a business perspective, hay has also provided advantages for my growers.
Doing farm plans and comparing budget to actuals with my growers since 2008, I have seen a widely varying range of seasons and the effect they have on a grower’s bottom line. Some leaner seasons, some good seasons, one very dry season and one tremendously wet season!
Almost without exception, across the years, oaten hay is in the top two best performing crops, gross margin wise. Gross margins are calculated using contract rates for all operations as this provides uniformity across all growers.
To demonstrate this point I have included the actual figures for one of my clients from 2008 to the end of the 2015 season (Table 1).
In this time the client began to introduce hay into his program as a means of risk mitigation and weed management. It is now an entrenched part of this grower’s cropping rotation; and you can see why!
| Year | Crop | Yield (t/ha) | Price ($/t) | Gross Margin ($) | Top 3 GMs per year | Notes |
|---|---|---|---|---|---|---|
| 2008 | Barley | 4.41 | 189 | 495.99 | 2nd | |
| Conv Canola | 1.35 | 450 | 146.75 | |||
| Oats for Hay into Lucerne | 4.15 | 220 | 415.22 | 3rd | ||
| Oats seed | 0.83 | 800 | 331.07 | |||
| Peas | 0.92 | 410 | -35.72 | |||
| TT Canola | 1.15 | 1.15 | 15.32 | |||
| Wheat | 3.12 | 283 | 363.72 | |||
| Wheat Hay | 5.07 | 220 | 642.37 | 1st | 1083ha total farm size | |
| 2009 | Barley | 4.36 | 140 | 304.34 | 3rd | |
| Conv Canola | 1.73 | 400 | 206.13 | |||
| Oats for Hay into Lucerne | 7.18 | 159 | 544.35 | 2nd | ||
| Oats seed | 2.74 | 500 | 1147.92 | 1st | ||
| Peas | 1.2 | 260 | -13.57 | |||
| Wheat | 3.68 | 181 | 286.18 | |||
| 2010 | Barley | 4.05 | 204 | 426.67 | 3rd | |
| Conv Canola | 3.1 | 500 | 1156.95 | 1st | ||
| Lupins | 2.03 | 150 | -45.53 | |||
| Oats for Hay into Lucerne | 5 | 90 | -22.17 | |||
| Oats for Hay | 4.59 | 68 | -182.27 | last | ||
| Peas | 1 | 255 | -22.17 | |||
| Wheat | 5.68 | 195 | 587.07 | 2nd | ||
| 2011 | Barley | 3 | 210 | 338.89 | 3rd | |
| Conv Canola | 1.23 | 403 | 677.75 | 1st | ||
| Oats for Hay into Lucerne | 4 | 135 | 206.42 | |||
| Oats for Hay | 5.5 | 135 | 390.4 | 2nd | ||
| Peas | 1.6 | 230 | 80.17 | |||
| Wheat | 2.27 | 180 | 248.17 | |||
| 2012 | Barley | 4.52 | 240 | 708.48 | 2nd | |
| Conv Canola | 2.06 | 520 | 511.94 | 3rd | ||
| IT Canola | 1.9 | 520 | 384.66 | |||
| Lupins | 1 | 350 | -8.45 | |||
| Oats for Hay into Lucerne | 3.3 | 220 | 284.89 | |||
| Oats for Hay | 6.72 | 205 | 749.31 | 1st | ||
| Peas | 0.8 | 350 | -84.92 | |||
| Wheat | 2.9 | 252 | 292.19 | |||
| 2013 | Barley | 3.43 | 202 | 160.19 | ||
| Conv Canola | 2.06 | 500 | 259.62 | |||
| IT Canola | 1.94 | 500 | 410.9 | |||
| Lupins | 1.5 | 280 | 59.8 | |||
| Oats for Hay into Lucerne | 8.7 | 150 | 820.57 | 1st | *Top up paid of $40/tonne in April 2014 | |
| Oats for Hay | 7.77 | 140 | 609.01 | 2nd | *Top up paid of $40/tonne in April 2014 | |
| Wheat | 3.3 | 252 | 375.37 | |||
| Wheat Hay | 8.28 | 127 | 496.92 | 3rd | *Ended up getting $160/tonne in August | |
| 2014 | Barley | 4.52 | 268 | 709.3 | 3rd | |
| Conv Canola | 2.1 | 475 | 484.51 | |||
| IT Canola | 1.6 | 475 | 138.96 | |||
| II Canola | 1.55 | 475 | 189.29 | |||
| Lupins | 1.5 | 450 | 266.99 | |||
| Oats for Hay into Lucerne | 8.34 | 270 | 1502.34 | 1st | ||
| Oats for Hay | 7.87 | 270 | 1299.59 | 2nd | ||
| Wheat | 3.79 | 276 | 534.9 | |||
| 2015 | Barley | 4.38 | 110 | -36.93 | ||
| IT Canola | 0.36 | 480 | -315.97 | |||
| TT Canola Hay | 3.26 | 200 | -141.98 | |||
| TT Canola | 0.68 | 480 | -306.42 | |||
| Oats for Hay into Lucerne | 2.62 | 240 | 168.39 | 3rd | ||
| Oats for Hay | 4.42 | 265 | 554.84 | 1st | ||
| Wheat | 2.21 | 164 | -31.79 | |||
| Wheat Hay | 4.18 | 220 | 324.74 | 2nd | 1124ha current farm size |
Table 1 indicates that hay has been one of the top returning enterprises each year. Whether it is oats for hay as a crop, oats for hay sown into lucerne, or a wheat crop cut for hay because it was frosted (2013) or because the spring was poor, hay despite all the different scenarios, continues to be a top returning enterprise. Even canola hay last year was far less painful than leaving the crop to harvest for grain.
This grower really has not increased his cropping intensity over these eight seasons. He continues to crop around 800ha and has approximately 350ha of land in lucerne or clover on which he runs sheep.
The cropping program pays for, and therefore sustains, the losses of spraying, fertilising and sowing of oats or rye into the grazing paddocks. Pulses are generally only in the rotation to under-sow with lucerne before paddocks go out to a hay and grazing phase. Paddocks coming back into the cropping phase are spray-topped the first year and then chemical fallowed the next. Wheat is then sown the following year. Following that, canola is sown and then back to wheat.
The figures in Table 1 show that every year through that time the cropping enterprise made a profit and hay has been a high performing contributor every year. The one obvious exception was 2010. During this year there was relentless spring rains and the hay baled was very poor quality and there was some he did not even bale. If you have a balanced cropping program, as this grower does, the other crops will, and did, make up for that sort of spring.
Figure 1: Average gross margin for each enterprise for the 2008 -2015 period (note. refer to Table 1 to determine which and number of years used to calculate each enterprises’ average gross margin).
A few other hay anecdotes from the Elmore area about 2015
2015 was a particularly poor year in the Elmore district, with growing season rainfall (GSR) somewhere between decile 1 and 2. Despite this, hay proved to be a very sensible option.
Case study 1
A local Elmore grower sowed 500ha to wheat and of that cut 250ha for hay and harvested 150ha for grain. He averaged 0.65t/ha of wheat on the crops he left for grain and 2.5t/ha for the wheat crops cut for hay. Assuming a wheat price of $250/t and $220/t for hay, he achieved $162/ha income from the grain and $550/ha income from the hay. The costs associated with each enterprise are detailed in Table 2.
| Wheat crop harvested for grain | Wheat crop cut for hay | ||
|---|---|---|---|
| Costs pre-harvest | $350/ha | Costs pre-harvest | $350/ha |
| Harvesting | $50/ha | Cutting | $50/ha |
| Rake | $10/ha | ||
| Bale | $35/t = $87.5/ha | ||
| Pick up and stack | $15/t = $37.5/ha | ||
| Cartage | $5/t = $12.5/ha | ||
| Total | $400/ha | Total | $547.5/ha |
Let’s even include the cost of having a $275K shed which can hold 2500 tonne. If we depreciate that over 10 years down to zero that’s $27,500 per year. If we fill the shed up, the cost of the shedding is $11/tonne.
As the income generated from hay was $550/ha, this grower, even when including the cost of a hay shed, would achieve a close to break even situation out of cutting the wheat for hay. In contrast, the paddocks harvested for grain would achieve a $200-$250/ha loss, as income generated was $162/ha and cost of growing the crop was $400/ha.
Case study 2
Land is at the Northern end of our area and as such some of his farm was in an even lower rainfall area. His rotation is simple; canola (25%), wheat (25%) and oats for hay (50%). His results were as follows:
- 346ha of TT canola with a yield of 0.69t/ha and GM of minus $403/ha. This resulted in a total loss of $140,000 for the canola enterprise! The canola paddocks were all limed and deep ripped, and in my planning all of these costs are attributed to the first crop. This makes the size of the loss greater for this enterprise.
- The wheat sown for grain got cut for hay. 390ha of wheat cut for hay with a yield of 2.78t/ha, GM of $85.72/ha. This resulted in a total profit of $33K. Some of the wheat got rained on and was sold at a reduced price in the windrow, to a buyer who subsequently baled it himself into rolls. That substantially affected the price per tonne received and therefore the gross margin.
- 732ha of oaten hay with a yield of 4.02t/ha and GM $300/ha. This resulted in a total profit of $220K.
As you can see, this grower is a big fan of hay having 50 per cent of his farm sown to oaten hay. Being well geared up for export oaten hay production also gave him the tools and skills to decide to cut the wheat for hay as ‘it was dying in front of our eyes’.
Case study 3
Another interesting observation from one of my growers came out of two barley paddocks side by side which ended up with quite different outcomes. The barley crop on the 2014 oaten hay stubble yielded 1.5t/ha of F1 barley. Next door on a 2014 wheat crop stubble the barley ended up yielding 0.5t/ha of F3. That’s $330/ha of income from the hay stubble compared to $85/ha of income from the wheat stubble. We are convinced that the difference in yield is because of a greater amount of moisture left in the paddock which was hay compared to a wheat crop paddock in 2014.
Not always beer and skittles
Clearly hay is not all beer and skittles. As one of my growers said, “Hay is always too something…”. Too wet to bale, or too dry to bale, for example.
If you are a hay and grain grower, you are never really happy in October and the first bit of November, whether it’s raining or not. Either your hay is getting rained on but your grain crops are benefiting, or, it is not raining so it is good hay making weather but your grain crops are suffering!
For export hay you need to get the moisture in the hay down to around 12 per cent before looking to bale it. That can be a long and frustrating wait. Then there’s baling! The right time to bale if you have had a dewy morning may vary from 9am in the morning to 1pm in the afternoon. Or, on really hot days it may be ready to bale only between 3am and 7am when there is a bit of dew to bale with. Or, you may not get suitable conditions at all and you have to wait until they arrive.
For many growers the barrier to entry into the export oaten hay market is the large investment required. The necessity for adequate shedding is almost a prerequisite. A new baler is approximately $200,000. A new mower/super conditioner is $220,000 and a telehandler another $140,000. If you have a truck and you want to cart your own hay, you will need a flat top trailer as well.
Consequently there’s a lot of investment required to be in the export oaten hay business. Obviously you don’t need to buy all the gear at once, or have all new gear. Having good contractors nearby and/or having neighbours to work in with and share machinery can work as a way to gradually enter this new production system.
From my experience, with the growers I work with, once they have included export oaten hay in their cropping rotation they have continued to do so and on an increasing scale.
Contact details
Greg Toomey
Landmark Elmore
greg.toomey@landmark.com.au
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