Tuesday, September 3, 2013

Pricing Corn Silage

Pricing corn silage is a difficult decision because it often comes at a time when emotions between sellers and buyers are high. The seller has the opportunity to sell a corn field for either silage or grain and incorporate the fertilizer value of the stover back into the field. The buyer has the opportunity to buy a corn field for silage or buy grain from the market and purchase low quality straw (wheat or corn stover aftermath) to formulate rations.

Arriving at a fair price and being able to take into account the markets (grain, straw, milk and silage), fertilizer, harvesting and quality costs is a difficult decision. Somewhere in the middle of the seller and buyer perspectives negotiations should be able to arrive at a fair price. The Sterry et al. spreadsheet (see http://corn.agronomy.wisc.edu/Season/DSS.aspx) accounts for both the seller and buyer perspectives to arrive at a fair price for corn silage. This article performs a sensitivity analysis of this spreadsheet.

The assumptions and initial values typical for the market conditions heading into the 2013 harvest are shown on page 2 of the original article (click here). To produce the sensitivity analysis in Table 1, one input value at a time was changed on the spreadsheet for grain price, milk price, grain yield, starch content, straw price and NDFD. This can lead to somewhat ambiguous conclusions. For example, often the seller receives a lower price than what the buyer must pay for grain, however, in this example the seller and buyer grain prices are held the same. Also, when one quality measure moves in a certain direction (i.e. starch content) other measures (i.e. grain yield or NDFD) are affected as well. In 2013 many corn fields were late late-planted and affected by drought which affects yield, starch content and NDFD.

Table 1. Sensitivity analysis of seller and buyer perspectives using the Sterry et al. spreadsheet for calculating the value of standing corn silage ($/T) with quality adjustments.

Grain prices between $4 and $7 per bushel affect corn silage price from $28 to $51 per Ton wet. Milk price affects the buyer decision much more than the seller. Low grain yields reduce the price of standing corn silage as does lower starch content. Straw price does not affect the seller perspective, but does affect the buyer perspective of a standing corn silage field because he has the option to buy wheat straw. NDFD had little effect on corn silage price in this spreadsheet.

Users of this spreadsheet need to input their own data for the values used in the calculations.

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