Buying and Selling Standing Crops


Who's Going to Get the Advantage?



Producers are often approached to purchase standing hay crop and corn for both silage and corn grain. This can be a complicated question. How do you establish a price for the product? What about the value of the soil nutrients removed by the harvested crop? Sometimes the owner of the crop performs some of the harvesting operations like mowing the hay or maybe the owner allows the purchaser to use some or all of his equipment.

Establishing a price for the standing crop is generally based on a similar product being sold at the local markets. This opens up a big can of worms. How does one evaluate the quality of the standing crop? The quality depends on two factors. First how mature is the crop and secondly how much legume and weed free is in the standing hay?

How does one determine the percent legume in a 20 acre field that varies widely across the field? If the landlord is to be paid on the quality of the harvested crop and the operator is slow to harvest the crop; is that the landlords fault? Is the tardiness on the part of the purchaser of the standing hay due to continuous rain? Oh, and by the way, if these set of questions aren't enough, what happens in a year like 2014 when it is very wet and the operator of the land destroys the hay stand by rutting up the fields? Who pays for the loss of the stand? Who pays to reseed the fields?

What about buying standing corn for silage or grain. Wet conditions this spring prevented the planting of the low areas of the many fields. So how many acres are really harvestable in the 20 acre field? The wet areas of the field that were planted will produce low quality silage and produce low grain yields.

Here are some thoughts to consider when sorting out this potentially controversial transaction. First of all, it is imperative to know how many acres were actually harvested. Secondly, we need to know the volume harvested in tons or bushels. I have to relapse for a moment and add this observation.
Would anyone buy a 50# bag of feed that feels like 25# when you load it in the pickup without questioning the sales person? No way, but producers and landlords buy and sell hay and corn silage all the time guessing at what the bales weigh or the wagon load of silage weighs.

The next step is to decide on the quality of the product. There are a number of ways to do this. Refer to the local hay markets for the value of hay by the ton based on type and quality. Another way to determine the price of a feed product based in part on quality but accurately based on the relationship between feed stuff nutrients is to use the University of Wisconsin's monthly FeedVal predicted feed price and ranking report. The report is available at http://dairymgt.info/tools/feedval_12_v2/index.php. This report and user spreadsheet, mathematically compares the costs of many feed nutrients and ranks the feeds stuffs by value as well. This report can provide some base line for pricing forages. Actual forage analysis will provide a more exact value for the harvested crop.

Once a comparative price has been established, the product must be corrected for moisture content. Finding the dry matter price based on similar forage crops is a good method. For grains, the standards have been established for both moisture and grain quality. I have not addressed other points of discussion such as transportation, the basis on grain (local demand) and another dozen or so items sellers and buyers need to iron out before the crop is harvested.

Sellers and buyers need to do their homework even though arriving at a fair agreement is somewhat complex. It is helpful to think through who is going to do each operation and determine what the cost of that operation. Start with the harvested value for the crop and subtract the cost of each operation from the harvested crop. These costs can be secured by Googling university custom rate and cost of operating guides.

If you would like an independent third party to carry out the negotiations and work through the math details on these arrangements, do not hesitate to call Greg Booher, Lakeshore-Moraine Park Technical College at 920-960-0551 or greg.booher@gotoltc.edu for assistance.
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10.7.2014