(When hay is less expensive than pasture)
Such a budgeting process should be done each and every time any such decision is made. The economy and its markets are not static. They are dynamic with ever changing supply and demand.
The most profitable place changed more frequently than one would expect. This was, of course, because of volatility and differences in feed prices, vs transportation costs, and expected finished price.
By Dave Pratt via Ranching for Profit Blog
An Executive Link member from Nebraska sent me an email that could turn the grazing world upside down. He wrote to say that he’d crunched the numbers and his figures showed that feeding hay was less expensive than leasing pasture. He concluded that it was more profitable for him to feed his own cattle hay in the feed lot and bring in outside cattle to custom graze on his pastures than it was to graze his cattle on his ranch. He wrote, Am I the first person to have read Kick the Hay Habit and conclude that I need to pick up the habit? He added, This doesn’t sit well, as it is my paradigm that there is no place for hay on a profitable ranch. I joked back to him that hay did have a place…his neighbor’s place. But then I looked at his numbers and saw that he was right.
According to his numbers, which he’d drawn from published reports from reputable sources, pasture leases in his area averaged $27/acre while prairie hay was selling for $80/ton delivered. He calculated that, at that price, a pasture lease would have to be $18/acre to compete with hay.
The economic comparison of feeding hay vs. grazing pasture isn’t as clear as you might think. There’s the efficiency of use, the cost/value of nutrient redistribution, and several other things to consider. Of course, a bigger issue is the cost of the hay. Even bigger may be the cost of feeding the hay. Feeding takes labor overheads and usually involves capital investment in equipment. If we feed it in a dry lot, we also have to account for the costs that come with raising livestock in confinement (dealing with concentrated dung and urine).
Grazing pasture vs. feeding hay is a separate issue from growing vs. buying hay, but when forage is priced higher on the stem than in the bale it is crazy to even think about growing it. Even when hay is more expensive than pasture, most ranchers who grow their own hay, lack the economy of scale to justify the capital expense for the hay equipment they have. They’d be better off turning their hay ground into grazing ground.
Rents and custom grazing rates in some parts of the country are so high that it has turned the grazing world upside down. I think this is a temporary situation. Markets have a way of adjusting and I think the spread between hay prices and pasture rents will shift so that grazing your cows on pasture is more profitable than feeding your cows hay. But right now, in some places, the most profitable strategy may be to custom graze outside cattle or lease your grass and feed hay to your own cattle in a dry lot.
Look, up in the sky. It’s a bird. It’s a plane. No, it’s a pig.
A Handbook for Ranch Managers. In keeping with the “holistic” idea that the land, the livestock, the people and the money should be viewed as a single integrated whole: Part I deals with the management of the natural resources. Part II covers livestock production and Part III deals with the people and the money. Not only would this book make an excellent basic text for a university program in Ranch Management, no professional ranch manager’s reference bookshelf should be without it. It is a comprehensive reference manual for managing the working ranch. The information in the appendices and extensive bibliography alone is worth the price of the book.
You might be interested in this books supplement: Planned Grazing: A Study Guide and Reference Manual.