Yields Critical to ‘Grow or Buy' Decision

Crop yields are critical to determining whether it’s cheaper to buy feed or grow your own. If you can’t get high yields, it may be cheaper to buy feed.

Twenty-five Pennsylvania dairy farmers participated in a cost-of-production study in 2016 and 2017 to look at the issue. Three fourths of these farmers double cropped small grains with corn silage to both minimize field nutrient losses and grow additional forage.

Penn State farm management analysts then took yield and financial information from these farms and divided them into high, medium and low profit groups. The high profit groups saw positive returns both years of the study, the medium profit group saw a profit in one year and the low profit group actually had negative returns both years.

For corn silage production, the low profit group had the lowest yields and highest costs, says the Penn State specialists. “The low profit group had 70% of their expenses going toward direct costs with 26% of that going to custom hire. On the surface, it appears the custom hire strategy may not be effective when yields are sub-optimal,” they say.

For small grain silage, the high profit group had 70% of its direct costs going into production, with land rent making up a large percentage of direct costs. “The low-profit group had 55% of expenses going towards direct costs… . The low-profit group is producing small grain silage at market cost,” they say.

The analysts also note that seed, fertilizer and chemical costs were very similar among all three profit groups. Yield, other direct costs such as custom hire and land rent, and indirect costs such as hired labor, loan payments and other overhead all affected profitability.

The key is good records, and then knowing what it is costing you to raise feed. “Problems in the cropping enterprise can result in the whole farm profitability being compromised,” they say.

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