Corn silage pricing considerations

Posted on June 18, 2019 in Forage Foundations
By Randall Greenfield, Vita Plus dairy specialist
I often get requests to help assign fair prices for forages to be sold or bought by dairy producers.  Corn silage is one of the easier forage values to calculate because its value is based on corn grain, which is regularly traded on the market.

The old thumb rules for pricing corn silage are still used extensively:

  • For fermented, shrunk and stored corn silage, multiply the price of corn by a factor of 10 to get a price per wet ton.
  • For a crop of corn silage still standing in the field, multiply the price of corn by a factor of 7 to 8 to get a price per wet ton.

Both these thumb rules assume a dry matter (DM) content of 35% (65% moisture).  The price of corn may take more thought than these simple formulas imply.  Whose price of corn will you use?  The seller’s or the buyer’s?

While these rules are a quick and easy way to come up with a price, a more thorough approach might make sense for your situation. The University of Wisconsin Extension has an excellent spreadsheet that compares the value of a corn crop from both the buyer’s and seller’s perspective, using grain production and sales as the alternative to harvesting as silage. The spreadsheet can be obtained here.

Because it’s more accurate, the spreadsheet requires estimates of the actual costs of corn production and harvest. I suggest using the midpoint of the two resulting values as the selling price.

Here are several other considerations to keep in mind when pricing forages:

The thumb rules assume 35% DM, and the UW spreadsheet asks for the expected DM of the silage.  This can easily be adjusted for the actual moisture by a simple conversion.  The buyer should not pay for more water.  As the moisture content of the silage increases, it contains less DM, so the price per ton goes down.  Conversely, the drier the silage, the more DM in a ton of silage, so the price should go up.

As a silage gets drier, other things can change. Most notably, fiber digestibility and starch levels decrease.  This decreases the amount of energy that the cows will be able to utilize from the silage. A cap on DM content to allow for price adjustments may make sense, especially if it’s a standing crop being sold and the seller has control of the harvest timing.

Corn grain makes up a significant portion of the crop’s mass and can carry an even greater portion of the value.  The starch content of the silage is a major determinant of its energy content. While the price of corn silage is not often adjusted for its starch content, it should at least be considered, especially in crops that have had major stressors.

Fiber digestibility/BMR
The other major portion of the crop that determines its value is the fiber. The extent to which the fiber is digestible by the cow ends up being a large determinant of the silage’s ultimate value to the buyer. Again, the price of corn silage isn’t usually adjusted for fiber digestibility, except for brown midrib (BMR) silage.  BMR corn silage contains less lignin (an indigestible fiber component) than conventional hybrids and has some of the highest fiber digestibility values available to us today. These hybrids do carry more cost because of higher seed cost, agronomic risks and lower yields. The seller will need a higher price to justify growing BMR corn for silage. The higher cost of BMR silage should be balanced by better cow performance on the buyer side.

Be sure it’s understood which party is carrying the cost of fermentation shrink, which can be an 8% to 10% loss or more. If the crop is sold standing in the field, the buyer will incur the shrink, as the tons being weighed are fresh and unshrunk. If it’s being sold out of storage, the shrink was incurred by the seller.

The best method to determine the amount of silage is to scale each load being sold. This is not always possible. An alternative is to weigh and count several representative loads.

Finally, almost any selling arrangement can be successful from both the buyer’s and seller’s perspectives as long as the method of pricing is discussed and understood by both parties well in advance of the actual sale.

Category: Business and economics
Forage Foundations