A new approach for adjusting corn silage contracts
Grain producers and dairyman annually debate the question, “What is corn silage worth this year?” Corn grain yields can be all over the board due to management and environmental effects. With variability in corn maturity and quality comes variability in price. Most farmers want a pricing method that is simple yet justifiable.
Grower-dairyman silage contracts are typically based upon prices determined at some point during the growing season using CBOT and CME grain markets. A fair price must be negotiated from the seller’s (minimum to accept) and buyer’s (maximum to pay) perspectives. Buyers and sellers need to consider local market conditions that will influence the final negotiated price.
In most years there are about 8 bushels of corn grain in a ton of corn silage. However, significant variation in this number is caused by the production season, forage moisture, and the actual grain-to-stover ratio. Often, the recommendation is to multiply the price of grain corn times 7.5, 8 or 8.5 to get the comparative price per ton for wet silage. It usually is a good estimate because the cost of grain harvest (a savings) is near equally offset by the value of additional nutrients and organic matter removed in the silage crop (a cost).
Keep in mind that the seller's equivalent net return for grain price is essentially a floor, or minimum price. From the buyer’s perspective, there may be reason to pay more or the need to look for cheaper alternative feeds. Corn grain price drives silage price. Both buyer and seller need to first agree on how the base grain price will be determined. Some options include local price on a given date, average of local price on several dates, or using a futures market price. Once a base price is determined, some adjustments may still need to be made. Finally, sell by the ton; estimating silage yield and selling by the acre will almost always result in someone getting the short end of the cornstalk.
Factors affecting the grain equivalent calculation
Harvest timing can affect grain yield in the forage. Kernel milkline is a good indicator of development and remaining potential grain yield. For example, grain yield can still increase 5 to 12% when the kernel is at 50% kernel milk. No further grain yield increases occur after “black layer” formation at the kernel tip. Make price adjustments for immature corn. The easiest way to do this is to take a percentage of the normal price (for example: use 70 to 80 percent of a normal corn price based on lower silage quality).
Moisture content in forage and grain has a major influence on this relationship and needs to be considered to accurately determine fair forage prices. If the base price is set for 65 percent moisture corn silage, an adjustment must be calculated if the silage is harvested wetter or drier than 65 percent.
Environment can significantly affect the amount of grain in corn forage. Drought can reduce plant stature and affect pollination reducing both grain and forage yield. Sometimes early drought can reduce plant stature, but normal precipitation might relieve stress, and high grain yields occur. Depending upon year, grain equivalents have ranged from 6.4 to 9.4 at a 150 bu/A yield level. Some locations produced consistently higher grain equivalents than others.
Hybrid types evaluated have included bmr, leafy, bioengineered, and conventional hybrids. The range among hybrids for grain equivalents was 6 bu/T (min. hybrid= 4.5 bu/T, max. hybrid= 10.5 bu/T). Brown mid-rib hybrids had significantly lower grain equivalents than conventional or bioengineered hybrids.
A new approach – using starch content
In order to accurately use grain equivalents in contract negotiations, measurements need to be taken “after the fact” (after silage harvest). Few growers are willing to leave “check strips” in the field. Weather, wildlife and hybrid standability and ear droppage can influence post-silage harvest grain yield measurements.
To deal with variability, corn forage starch content at harvest can be back calculated to determine grain equivalents on a field-by-field or load-by-load basis (Starch method in Table 1). This would allow for a much more accurate estimation of corn grain produced in a field regardless of circumstance and a fairer method for payment.
Assuming that starch is 70% of the grain, we can back calculate grain equivalents using starch content and forage yield (Starch method in Table 1). This method consistently underestimated true grain yield equivalents. The difference (or bias) between these two methods was affected by the grain yield level. However, by using a forage yield measurement, a more accurate contract could be arrived at between grain producers and dairymen.
Joe Lauer is an agronomy professor at the University of Wisconsin-Madison and UW-Madison Agronomy and UWEX state corn specialist