The value of a hay bale is determined by a complex set of supply and demand factors, said Scott Clawson, Oklahoma State University Extension Agricultural Economist.
Writing for the Cow-Calf Corner, Clawson said cattle producers could say that hay, especially in drought conditions, is an essential item for the cow herd. Thus, it will be purchased for the cows regardless of price until it reaches a point where liquidation of cows becomes necessary.
A NECESSITY
While western Oklahoma is parched, most two-lane highways in eastern Oklahoma have hay for sale and fertilizer spreaders are starting to shake off the cobwebs, he said.
The market determines the value of the hay, Clawson said. This issue is separate from what it costs to produce hay.
It seems like no conversation about the cattle business can occur without comparisons to 2014, he said. From December 2014 to January 2025, fertilizers, chemicals (including herbicides) and fuel have increased by 13%, 15% and 9%, respectively.
During the same period, supply/repair costs and machinery costs have risen by 38% and 51%, respectively, Clawson said.
Admittedly, that comparison is not bulletproof, he said. It compares two points in time and the categories are broad, but it suggests that the cost of owning and maintaining equipment warrants further analysis on the ranch.
The price trend of haying machinery and attachments keeps going up, with a surge from 2021 through 2024, Clawson said. Careful consideration and planning will be needed when replacing these assets.
ANY OTHER STRATEGIES?
So, now what? Are there other strategies to consider? Clawson asked. Currently, there is a fair to good chance that hay could be purchased at a lower price than the cost of production (assuming all costs are considered).
A ranch that has adequate hay storage could explore scaling back hay production this year and buying hay on the open market, he said. This would create the opportunity to reduce equipment wear and tear, extend its lifespan, increase grazable acres and potentially lower fertility inputs.
Having adequate hay storage capacity provides multiple risk management and business opportunities, Clawson said. Building or expanding this capacity could serve as a worthwhile investment as cattle prices allow money to be reinvested.
Running cows and row crop farming don’t always overlap, but in this matter, they do, Clawson said. The price of crops (hay, corn, etc.) is sensitive to changes in supply.
Sufficient hay inventory and expected production will continue to pressure hay prices. As cattle prices continue to flex their muscles, how we allocate these profits will have long-term implications for the ranch.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $210.35 per cwt to $211.00, compared with last week’s range of $202.49 to $214.41 per cwt. FOB dressed steers, and heifers went for $329.75 per cwt to $334.79, compared with $319.17 to $337.40.
The USDA choice cutout Tuesday was down $2.32 per cwt at $339.90 while select was off $3.24 at $318.83. The choice/select spread widened to $21.07 from $15.25 with 91 loads of fabricated product and 24 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef was $379.20 per cwt, and 50% beef was $119.68.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.20 to $1.32 a bushel over the May corn contract, which settled at $4.57 3/4, down $0.04.
The CME Feeder Cattle Index for the seven days ended Tuesday was $291.27 per cwt, up $0.25. This compares with Wednesday’s Apr contract settlement of $288.87, up $0.60.