What is the value of the nitrogen, phosphorous, and potassium that is removed when hay is baled and carried away from the field? In March, we looked at wheat straw nutrient removal1, but the value of nitrogen, phosphorous, and potassium should also be considered in hay production.
Baling and removing 8,000 pounds of Bermuda grass hay over the course of a hay season removes 400 pounds of nitrogen (N), 90 pounds of phosphorus (P2O5), and 345 pounds of potash (K2O) per acre2. Prices of $0.71 per pound of nitrogen, $0.73 per pound of phosphorus, and $0.61 per pound of potash3 were used to reflect the approximate value of the nutrients. The table below shows the value of the N, P2O5, and K2O removed on a per acre basis when 8,000 pounds of Bermuda grass hay is removed. The value of the nutrients removed by the Bermuda grass hay is $561.61 per acre per year. Or on a 1200-pound round bale basis, that value is $54.24 per bale. Adding the cost of baling (1200 lbs. round bale) of $14.504 per bale and moving4 the bales out of the field at $4.35 per bale brings the total costs to $103.09 per 1,200-pound bale. Converting these values to a per ton basis (4 tons/acre), the nutrient value is $140.40 per ton, and baling and moving is an additional $31.42 per ton. The total per ton costs are $171.82.
It should be noted that this is just the value of N, P, and K, as there are some micronutrients that are removed as well.
There are caveats. The amount of hay harvested, costs of nutrients, baling and moving will likely be different depending on numerous factors, including location, yield, type of bales, the efficiency of the baler, and soil type. Check local resources in your area to estimate the value/cost of the nutrients and baling costs.
Information for the values included in this article can be found in the following resources.
In forage production, whether that is establishing a forage system or simply maintaining it, it is important to understand what costs are involved and how these can impact your break-evens. A break-even is the price/yield needed in order to cover your total costs. Depending on the type of forage system you have, the costs can be relatively expensive. Developing an enterprise budget is one way of examining and comparing these costs.
Figure 1 shows the costs per acre from forage enterprise budgets developed at Mississippi State for four different forage maintenance systems: 1) conventional alfalfa hay, 2) permanent summer pasture, 3) mixed grass hay, and 4) hybrid bermudagrass hay. The conventional alfalfa and the hybrid bermudagrass systems had the highest costs per acre at $957.63 and $954.22, respectively. Permanent summer pasture maintenance had the lowest costs per acre at $282.24/ac. Fertilizer, herbicide, and machinery costs make up a large portion of the costs in each system. Machinery costs include fuel, repair and maintenance, and interest costs.
Figure 1. Costs per acre for forage maintenance production systems in Mississippi
Figure 2 shows the break-even curves for each of the four forage production systems. Break-even curves show the price and yield needed to cover total specified expenses. Price/yield combinations below this curve would result in losing money, and any combination above the curve would generate a profit. The market price shown in the figure was the average hay price received by producers in Mississippi for 2022 at $126/ton. Hay prices and costs can vary significantly from state to state, so again, it is important to adjust for your situation. However, the basic idea is that production systems with higher costs need a higher price, yield, or both to be profitable. For example, at the Mississippi 2022 market price and assumed costs, a permanent summer pasture system would need to produce 2.2 tons/ac to break-even. A mixed grass hay system would need 4.9 tons/ac to break-even. A conventional alfalfa hay system and a hybrid bermudagrass hay system would each need to produce around 7.6 tons/ac given a price of $126/ton. As such, permanent summer pasture and mixed grass hay are two of the more popular forage systems in Mississippi.
Figure 2. Forage maintenance break-even curves in Mississippi
More information on these costs, as well as over 20 additional forage maintenance and establishment budgets for Mississippi, can be found at: https://www.agecon.msstate.edu/whatwedo/budgets.php. It is important to determine what your specific costs are, and these can vary significantly from state to state and by production system. Below are links to enterprise budgets developed by agricultural economists for each state in the Southern Region.
We have now past the midway point for the 2023 calendar year. We are carefully and optimistically watching our crops develop as well as keeping tabs on global events. It has been another wild year with crazy weather and its effects around the country, from areas of drought and high heat, to areas where excessive moisture has produced standing water and flood warnings. The upheaval in Eastern Europe, Russia’s ongoing attempt to take over Ukraine, continues to create a variety of issues around the globe. With all the issues taking place, we are seeing variability and fluctuation in commodity prices, both positive and negative, and we can sometimes get dizzy thinking about all of the “what ifs.” When this happens, we choose not to want to think about it, and it simply creates management decision paralysis. We need to eat this elephant one bite at a time, and possibly request some assistance from the right individuals. Make sure you have the right information to make the best decisions that can be made to prepare for the rest of the season and year.
This is a good time to take a few steps to ensure you are on the right track for risk mitigation.
Have you scouted your crops to estimate yield, barring any late-season weather-related disasters? Does this match your marketing plan, or do adjustments need to be made? For livestock, do you have the feed necessary on hand/or being produced? Does additional feed need to be purchased? What options are available to lock in prices and supplies that allow for profit?
Review your marketing plan and determine if any changes need to be made. Is it time to look at additional hedging or spreads opportunities to help mitigate price/marketing risk?
Do you have labor available and can you afford what is needed? Is mechanization required to cut back on labor, and does it pay to do so?
Have you run cash flow estimates for where you believe you will be at the end of the year? Do you need to make adjustments, prepare for tax management strategies before the end of the year, cut back on expenses, increase sales of culls, other inventory to access cash, etc.?
Although the above-mentioned situations are things that we normally think about, we typically don’t give the thought each of those deserves as we get overrun with daily tasks on the farm. However, a mid-year check to mitigate risk may offer the opportunity for the farm or ranch to increase its cash flow. There are a number of resources available to assist farms and ranches in understanding the decisions to be made, and possibly even performing a true analysis of the farm financials. You should begin by contacting your local farm management/agribusiness Extension staff, legal and tax professionals, and others. But it must start with a plan, the farm/ranch goals, objectives, and knowing your numbers. If you do not have a way to collect the “numbers,” including production, income, costs, etc. or able to produce an easy way to review the information, you may be making decisions based on information that is incomplete at best.
With the variables presently at play today, it’s time to take a deep dive into what shocks your farm/ranch enterprise(s) can handle to determine the farm’s economic stability and sustainability. But without knowing the farms’ “numbers” the owner/operator will not know how to appropriately plan for potential changes.
Reach out to your local Cooperative Extension service and your legal and tax professional. Additional resources and tools can be found through your local Cooperative Extension website, and at ruraltax.org (www.ruraltax.org), Center for Farm Financial Management (https://www.cffm.umn.edu), National Council of Agricultural Employers (NCAE) (https://www.ncaeonline.org).
Southern timber prices in the first quarter of 2023 fell year-over-year for all product types. According to TimberMart-South, average prices dropped 7% to $25.87/ton for pine sawtimber, 15% to $9.39/ton for pine pulpwood, 5% to $31.95/ton for hardwood sawtimber, and 25% to $9.07/ton for hardwood pulpwood. However, the pine sawtimber prices are still above the pre-pandemic level.
The weakened timber prices are mainly caused by reduced demand for lumber. Higher mortgage rates, deteriorated housing affordability, and worries of an economic slowdown have cooled the general housing market and resulted in reduced housing starts (major driver of lumber and structural panel products). Lumber prices skyrocketed during the pandemic but have receded sharply since mid-2022 and have been stabilizing at the long-term average level.
Although we use south-wide average prices, it is hard to say we have an integrated timber market in the U.S. South. It is actually made up of multiple local timber markets and the timber prices are largely determined by local timber inventory, mill types and capacities, logging capacity, site accessibility, transportation conditions, etc. Therefore, some local timber markets may fare relatively better than others. For example, the average pine sawtimber prices in southeast Georgia, north Florida, and east Alabama are generally higher than the average prices in the West Gulf regions.
Considering the oversupply of sawtimber in the region, whether the decrease in timber prices will continue or not largely depends on factors from the demand side. Softwood lumber production capacity in the South has increased 20% in the past 5 years and reached 26.9 billion board feet (bbf) in 2022 (Forisk, 2022a). Announced greenfield construction and existing mill expansion suggest that the capacity could increase by another 5.1 bbf by 2025 (Forisk, 2022b). However, economic outlook (especially the housing market) adds uncertainties to the market.
References
Forisk. 2022a. Forisk North American forest industry capacity database.
Forisk. 2022b. Forisk Research Quarterly: Fourth Quarter 2022.
In the last several decades, the United States has seen a continuous decline in the supply of domestic farmworkers. Economic and population growth, as well as consumer preferences, have led to an increase in the demand for hand-harvested products. As a result of the strong demand for labor-intensive agricultural commodities and the limited availability of US-born farmworkers, the H-2A program has experienced rapid growth since the first visas were issued in the 90s (Gutierrez-Li, 2021). This legal avenue allows US employers to bring farmworkers for fixed periods of time on a seasonal basis.
While the H-2A program has worked as a lifeline to many US farmers who otherwise would have gone out of business, it has been criticized by some agricultural groups as costly and overly bureaucratic. Based on the program’s rules, US employers are obligated to pay for transportation from the country of origin of workers (and within the United States), compensation insurance, housing, and wages. Wages are perhaps the main source of controversy. According to the law, employers must pay their H-2A workers at least the highest of (Osti et al., 2019):
a minimum wage known as the Adverse Effect Wage Rate (AEWR)
the prevailing wage
the prevailing piece wage
the wage agreed upon a collective bargain or
the federal or state minimum wage
The AEWR condition is supposed to ensure that employing a foreign worker will not negatively affect the compensation of similarly qualified individuals working in related jobs. The wages differ by state and are generally set to a level above the minimum wage. All AEWRs were previously determined by surveys conducted by the US Department of Agriculture.
On February 28, 2023, the US Department of Labor (DOL) published a final rule that modifies how much H-2A workers need to be paid. The changes became effective on March 30, 2023. Specifically, the government agency introduced a new methodology for the calculation of the hourly wages of some H-2A workers. Under the previous methodology, which dates back to 2010, there were 50 different AEWRs (one per state, Figure 1). With the new rules, there could be multiple hourly wages paid to H-2A workers in each state. According to the new methodology, the DOL will continue to calculate the AEWRs for field and livestock occupations based on the US Department of Agriculture Farm Labor Surveys (FLS) whenever such information is reported. However, if the FLS does not report wages in a state or region, the DOL will instead use data from the Occupational Employment and Wage Statistics (OEWS) surveys from the US Bureau of Labor Statistics to set a statewide AEWR for workers of other categories.
Field and livestock workers include individuals who “plant, tend, pack, and harvest field crops, fruits, vegetables, nursery and greenhouse crops, or other crops” or “tend livestock, milk cows, or care for poultry,” including those who “operate farm machinery while engaged in these activities.” The Standard Occupational Classification codes (SOCs) and titles associated with these workers are: 45-2041 (Graders and Sorters, Agricultural Products), 45-2091 (Agricultural Equipment Operators), 45-2092 (Farmworkers and Laborers, Crop, Nursery, and Greenhouse), 45-2093 (Farmworkers, Farm, Ranch, and Aquacultural Animals), 53-7064 (Packers and Packagers, Hand), and 45-2099 (Agricultural Workers, All Other) (Department of Labor, 2023). For all other occupations, the DOL will set a statewide annual average hourly wage based on OEWS data. Additionally, if a job includes multiple tasks (thereby giving room for it to involve multiple occupations), the highest wage rate will be chosen.
It is too early to determine whether the new methodology will achieve the goal (of the government) of paying fairer wages to H-2A workers performing tasks that require more training or skills like van or truck driving. However, the new rule has already faced strong opposition from farming groups (Agriculture Workforce Coalition, 2023), which sued under the argument that it will make the H-2A program more costly and cumbersome than it already is. It remains to be seen how easy it will be for the government to classify workers’ occupations in practice and if employers will strategically classify workers to affect the wages they pay.
Figure 1. 2023 H-2A Adverse Effect Wage Rates
Source: U.S. Department of Labor.
References
American Workforce Coalition. (2023). Letter to the House and Senate.
Gutierrez-Li, A. (2021). The H-2A Visa Program: Addressing Farm Labor Scarcity in North Carolina. NC State Economist. North Carolina State University.
Osti, S., Bampasidou, M., & Fannin, J. M. (2019). Labor-Intensive Multiple Cropping Systems and the H-2A Program. Choices, 34(1), 1-6.
US Department of Labor. (2023). 2023 H-2A Adverse Effect Wage Rate (AEWR) Final Rule FAQs. Office of Foreign Labor Certification.
