As we transition to spring in the coming months, we will naturally shift gears and begin thinking about and preparing for 2023 hay production. It is difficult to overstate how important it is for us to have improved forage and hay production in the Southeast. We hope it will be different than last year. In 2022, most Southern states experienced some degree of drought. Input prices for agricultural chemicals, fuel, supplemental feed, and labor were all at their highest in recent memory. As a result, hay production declined by 16%, 13%, and 20% in Arkansas, Mississippi, and Kentucky, respectively.
Part of planning for this year’s hay crop is re-examining costs and breakeven prices. This article uses results from the 2022 Arkansas Hay Verification Program to examine hay production costs in Arkansas. The Arkansas Hay Verification Program (AHVP) is a collaborative effort between Arkansas forage producers, county Extension agents, and state Extension Specialists. Eight hay fields from seven farms participated in the 2022 AHVP and were all located in the Ozark district. The total acreage participating in 2022 AHVP was 252.5 acres or 36.1 acres per field. Hay production from the 2022 AHVP totaled 826.2 tons or 3.27 tons per acre. The estimated value of production from the 2022 AHVP totaled $127,239.42.
Table 1 below reports summary information for operating costs, total specified costs, and breakeven prices. Operating costs generally include herbicides, fertilizers, insecticides, fuel, custom rate application, and labor. Hay hauling was assumed to be a separate farm enterprise. Fixed costs include depreciation, interest, and taxes and housing costs on tractors and equipment. Total specified costs equal operating costs plus fixed costs. Breakeven prices are total specified costs divided by per acre production.
Operating costs averaged $375.14/acre with a range of $192.96/acre – $577.50/acre. Among all items, fertilizer represented the largest proportion of operating costs. Farms in the 2022 AHVP averaged $244.43/acre on fertilizer (including poultry litter), with a range of $92.00/acre – $428.15/acre. Higher fertilizer expenses were positively correlated with per-acre hay yields. A negative correlation was observed between fertilizer expenses and breakeven hay prices. Realized yield gains offset the higher costs from applying fertilizer.
Breakeven prices are calculated by dividing total specified costs by production per acre (tons/acre). Note breakeven refers to the hay price where revenue equals costs. The average breakeven price of hay among farms in the 2022 AHVP was $111.88/ton. Breakeven prices ranged from $82.72/ton to $160.99/ton. It is recommended that farms get accurate estimates for bale weights and price hay on a per-ton basis. Bales are not a standard unit of measurement and do not accurately reflect the value of production when priced on that basis.
Note: These estimates reflect summary data from eight farms in Arkansas that will not necessarily reflect any one farm’s situation.