Valuing corn silage correctly can be challenging under normal conditions because of variations in dry matter content and nutrient composition. Drought conditions magnify those challenges simply because of greater variation caused by stress during the growing season.
A number of different calculators have been developed to help buyers and sellers determine a fair value for corn silage based on estimates of corn yield. Simple rules-of-thumb have also been used relating corn silage price to the price of corn. Those guidelines generally work well enough, because they rely on normal relationships between bushels of corn grain in a ton of corn silage.
But what do you do when those relationships no longer hold? Pricing corn as a multiple of corn price intuitively does not make sense when there is little to no corn grain in the silage. Corn silage could be valued based on hay prices (adjusted for moisture). However, this approach artificially increases the value of silage crops because of low hay supplies.
Using Actual Composition is the Preferred Approach
Testing feeds and using the actual nutrient composition to establish value based on an agreed upon reference feed is the most accurate method and the fairest to both buyer and seller. Suppose that a farmer and livestock owner agreed to value silage at 90% of the Total Digestible Nutrients (TDN) value of corn (10% discount to account for nutrient losses during storage). Corn is approximately 88% TDN on a dry matter basis. If the new crop corn price was $5.20 per bushel, then a pound of TDN from corn silage would be worth 7.4 cents per pound ($5.20 divided by 56 pounds/bushels × 88% × 90%).
Suppose at harvest the drought-stressed corn silage tested 60% TDN (compared to a normal book value of 72%) and was 35% dry matter. One ton of silage contains 700 pounds of dry matter and 420 pounds of TDN. Multiplying that value by 7.4 cents results in a value of $31.08 per ton in the bunker, pile or silo. In this example, the responsibility of harvest costs would still need to be negotiated.
What About Buying a Standing Corn Crop?
There are considerably more unknowns when trying to price a crop standing in the field. In some cases, the corn is offered at a certain value per acre, requiring estimation of yield. Dry matter is challenging to estimate and play a major role in the actual value of high-moisture feeds. Drought-stressed corn is even more challenging, as the crops are often wetter (and therefore less valuable) than a visual appraisal would indicate. Finally, actual nutrient composition affects final value. Drought-stressed corn silage is usually 60 to 90% the energy value of normal corn silage, but that range leaves a tremendous amount of room for variation in value.
When variables that affect value must be estimated, reducing price is a reasonable approach to dealing with these uncertainties. The buyer would bear all the risk of estimating incorrectly, so building in some “cushion” to reduce the risk of over-paying because of incorrect assumptions would be prudent.
On the other hand, the standing corn does have value as a source of nutrients for next year’s crop, a source of soil organic matter and ground cover to reduce soil erosion risk. These values can also be challenging to estimate, but $10 per ton might be a reasonable minimum value to reflect the benefits to soil health and erosion prevention.
Salvaging a failed crop as silage to feed to livestock can be a “win-win” for both the crop grower and livestock owner. Relying on actual data rather than assumptions improves the odds of finding a value that is fair to both parties.