Hay Verification Program Summarizes Cost of Production

– James Mitchell, Livestock Marketing Specialist, University of Arkansas

The Arkansas Hay Verification Program is a collaborative effort between Arkansas forage producers, county Extension agents, and state Extension Specialists. The goal of the AHVP is to implement Extension recommendations for increased hay production in accordance with goals established by both the producer and the county Extension agent. The aim is to assist hay producers in Arkansas by improving the production and quality of their hay and forage resources.

Twelve hay fields participated in the 2023 AHVP. Fields participate on a two-year rotating basis. Among the fields participating in 2023, four participated in the 2022 AHVP. Participating farms are from Cleveland, Conway, Dallas, Drew, Faulkner, Marion, Miller, Union, Van Buren, and White counties. Two fields from Cleveland and Dallas counties participated. All twelve fields were warm season forages, which is the current requirement for AHVP.

The table provided above summarizes hay budgets for the twelve fields. Operating costs averaged $395.39/acre, ranging from $181.99/acre to $829.05/acre . Relative to results from the 2022 AHVP, operating costs were 5.4% or $20.25/acre higher in 2023. Total costs averaged $496.58/acre, ranging from $244/acre to $943.30/acre. Fields participating in the 2023 AHVP had an average fixed cost of $101.19/acre, up from $46.89/acre in 2022. Depreciation on tractors averaged $34.60/acre. Depreciation on implements was, on average, $42.10/acre. Larger fields were positively correlated with lower fixed costs per acre, reflecting economies of scale.

Breakeven prices are calculated by dividing total specified costs by production per acre (tons/acre). Note that breakeven refers to the hay price where revenue equals total costs. The average breakeven price of hay among farms in the 2023 AHVP was $129.07/ton, up from $111.88/ton in 2022. Breakeven prices ranged from $89.90/ton to $168.45/ton. Among the twelve fields participating in the 2023 AHVP, nine, or 75%, had a breakeven price below the 2023 state-average price of $144/ton estimated by USDA-NASS (2024).

The figure provided below shows cost items proportionally to total operating costs. Among all items, fertilizer represented the largest proportion of 2023 operating costs at 50%, down from 63% in 2022. 2022 began the Russia-Ukraine war. Uncertainty surrounding the conflict put tremendous pressure on global fertilizer prices. Russia is the world’s largest exporter of fertilizer, with an export value of $18.7 billion in 2022 (USDA-ERS, 2023). Global capacity to produce fertilizer has since adjusted for a lack of Russian exports, helping decrease on-farm fertilizer expenses. Between 2022 and 2023, Urea and Potash prices decreased by $0.15 and $0.17 per pound, respectively (Bloomberg Green Markets, 2024). Repairs (18.3%), Fuel (10.6%), and Labor (9.6%) were the next largest cost items. Poultry litter is calculated separately from fertilizer and reflects 4.9% of operating costs.