No law says that if you raise cows you also must raise hay. But many producers, whether motivated by tradition or habit, continue stockpiling a winter-feed supply without analyzing the costs associated with those activities. A winter feed supply is a necessity, of course, and a certain amount of hay is likely to be part of that supply. But a quick evaluation of hay harvesting and available alternatives can help ensure that next year's profits aren't baled up this summer.

To evaluate your hay production, separate hay harvesting from other operational activities. "The concept is to divide the ranch into profit centers," says Harlan Hughes, extension livestock economist at North Dakota State University. "You treat each profit center as a stand-alone business. For example, the beef cow profit center is charged the market value of farm-raised hay consumed, in turn the hay profit center is credited with the market value of the hay produced. You then find out if you made money raising hay."

The iron drag

Machinery is often the largest expense involved in hay production, and it's often the deciding factor of who is profitable in making hay. "Many producers have told me that they think what's dragging down their ranch is the iron," says Mr. Hughes. "And if you look back over the last 20 years, you'll see that the cost that's inflated the most is the machinery." Machinery depreciation and maintance is often the largest expense.

Land values also fall in this same category. To determine if these two things, land and machinery, are bringing profits down, you need to put them into a dollar amount you can charge the cowherd. (Figure 1). You then determine costs per acre and translate totals into a per ton basis. (Figure 2). Yield is a large determinant in your ending cost of production. Since many seasonal factors go into yield, profitability should not be determined on one year of production alone, but rather an average of years.
Going to market

Is it cheaper to buy hay? That question depends on what the market is. And, although many producers fear the unknown, or the non-traditional approach, you need to determine market values to at least compare to your own production costs. (Figure 3).

"Last year's drought was in many ways a good experience for us," says Jim McGrann, agricultural economist at Texas A&M University. "Producers were forced to buy hay and become familiar with the process. And many found out they could buy higher quality feed at a low cost."

When evaluating store-bought hay, consider quality. Can you produce a competitive product? The higher the quality of hay, the lower the supplemental feed costs to go with it.

Dr. McGrann also suggests having a protein analysis run on all purchased or self-produced hay. This allows you to determine the nutritional quality of the hay as well as what supplement costs should be factored in.

When obtaining market values for hay, look at the right time. High prices usually occur during the winter, since someone already paid for the storage. So the best time to shop for hay is during the harvesting period which, depending on where you're located, usually falls between May and August. By evaluating hay production as a separate profit center, you can determine how much you can pay for hay.

Other options

If you find that your cows can't afford the hay you're producing, what are the options? "If you just want to raise the hay and not own all the high-dollar equipment, you can hire custom harvestors," suggests Dr. McGrann.

Analyze your forage base and other production practices. There are many ways to minimize winter hay use. Find ways to extend your pasture grazing season through stockpiling, rotational grazing and matching calving season to grasses.

Check into other sources of nutrition. "Find out what it costs to provide the same dry matter, same protein, and same energy from totally different sources," says Steve Blezinger, consulting nutritionist in Sulphur Springs, Texas. "Look at grain or byproducts that will provide the same things without having to beat yourself half to death trying to make hay just because that's what you've always done."

Places to turn

Enterprise analysis is quite easy to accomplish with low-cost software and can help you determine your cost of production for every profit center in your operation. If you find that working the numbers yourself isn't working, turn to a source of help. Many nutritional or production consultants are in business to help you make money. You can also turn to university staff, extension personnel or financial planners to help analyze your costs.

Whether you turn to someone for help or do it yourself, start by keeping records. "You can't analyze information you don't have," says Dr. Blezinger. "There's a lot of expense in running 100 head of cattle, and you need to know where the money's going and when it's going to monitor cash flow and increase your bottom line."