Pricing standing corn silage
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EmailHow to find a starting point for negotiations between buyer and seller.
Sales of standing forage require an estimate of market price and a method of determining yield, whether forage is sold by the ton or acre, as a starting point for negotiations between the buyer and seller. This article describes a method to help determine a starting point for short-term sales of corn silage; it is not intended to be used for long-term contracts.
What is a reasonable corn silage price?
Corn silage is somewhat tougher to determine a price on in comparison to other forages. This is because there are no widely quoted market prices for this particular crop. Often, the values are based on relative feed value or comparisons to other crops, such as corn grain or hay.
The pricing of standing corn for the seller should consider the value of grain lost, the extra fertilizer value lost in the removal of the corn plant (stover), and harvest costs saved. In general, a ton of corn silage in the field can be valued at 8-10 times the price of corn per grain bushel.
Table 3 provides an estimate of the potential value of corn silage based on potential corn grain yields. If the potential yield is lower, a factor of 8 is recommended whereas a higher factor, such as 10, is often used for higher yield corn grain.
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Table 3: Value of standing corn silage based on expected yield of corn grain. |
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Low Yield |
Mid Yield |
High Yield |
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Potential corn grain yield |
67 bushels/acre |
134 bushels/acre |
201 bushels/acre |
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Expected corn grain price |
$3.75/bushel |
$3.75/bushel |
$3.75/bushel |
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Value of standing silage ($/ton) |
8 x $3.75 = $30.00/ton |
9 x $3.75 = $33.75/ton |
10 x $3.75 = $37.50/ton |
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Yield of corn silage |
10 tons/acre |
20 tons/acre |
30 tons/acre |
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Value of standing corn ($/acre) |
10 x $30.00 = $300 |
20 x $33.75 = $675 |
30 x $37.50 = $1,125 |
Note: Silage yields in Table 3 example are based on 65% moisture.
Nearby fields can be used to estimate grain yield or check strips can be left in the harvested field. Check strips are useful for instances of delayed or partial payment agreements. Final payment adjustments should be outlined in a signed, written agreement between buyer and seller.
What about different moistures?
The calculations used in Table 3 assume that the corn silage is at 65% moisture or 35% dry matter. To accurately adjust for moisture levels, subtract the actual moisture level from 100. Then divide it by 35 to calculate an adjustment factor. Then multiply the estimated value for 65% moisture by the adjustment factor. For example:
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Example 1 |
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Silage moisture level |
70% |
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Silage dry matter level |
100% - 70% = 30% |
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Silage value at 65% |
$33.75 per ton |
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Silage value at 70% |
$33.75 x (30/35) = $28.93 per ton |
Adjusting for moisture (or dry matter) is recommended for a more accurate estimate of silage tons per acre. Considerations should also include hybrid and environmental factors. For more information on the relationship between grain and forage yields, review “The relationship between corn grain yield and forage yield: effect of moisture, hybrid, and environment” by Joe Lauer from University of Wisconsin-Madison.
Factoring in The Opportunity Cost of Corn Stover
It is important to remember that the seller also gives up several opportunities if the field is sold for silage versus grain. There is an obvious opportunity to sell the grain, valued in the previous example at $3.75 per bushel. If our estimated per acre yield is 134 bushels, the value of the grain is $502.50 per acre. The seller may have also intended other uses for the field, including the stover. These may have sold the stover for feed or bedding and even rented the field for crop residue grazing. These lost revenues should be considered in the seller’s price.
As referenced earlier, if the corn is sold for silage, the entire corn plant (grain and stover) will be removed at the time of harvest. This may require additional fertilizer costs to the seller to replace the lost nutrients. The Tri-State Fertilizer Recommendations – Bulletin 974 outlines that corn silage contains 3.1 lbs. of Phosphorus (P2O5) and 7.3 lbs. of Potassium (K20).
Table 4 outlines valuing the nutrients removed per ton of silage using the cost of commercial fertilizers.
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Table 4. Value of nutrients removed per ton of silage based on replacement fertilizer costs. Diammonium Phosphate or DAP ($746/ton), and Potassium Chloride or Potash ($508/ton). |
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Nutrient |
Value/Pound |
Nutrient Removal |
Value/Ton |
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Phosphorus |
$0.58/lb. |
3.1 lbs. |
$1.80 |
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Potassium |
$0.41/lb. |
7.3 lbs. |
$2.99 |
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Total Cost |
$4.79/Ton |
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Note: Remember to remove the nitrogen cost when calculating the cost of Phosphorus in mixed fertilizers. Only the Phosphorus portion of DAP is used in the above calculation.
Using the example in Table 3 of 20 tons for the yield, the per acre charge for nutrient removal would be 20 tons x $4.79/ton = $95.80/acre. To gain an accurate value for fertilizer replacement, only the value of nutrients removed with the stover should be included. The seller would normally have the value of nutrients lost in grain covered by the grain value. Therefore, the nutrient removal from grain should be removed from the $95.80/acre.
Table 5 outlines valuing the nutrients removed per bushel of grain using commercial fertilizers costs.
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Table 5. Value of nutrients removed per bushel of grain based on replacement fertilizer costs. Diammonium Phosphate or DAP ($746/ton), and Potassium Chloride or Potash ($508/ton). |
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Nutrient |
Value/Pound |
Nutrient Removal |
Value/bushel |
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Phosphorus |
$0.58/lb. |
0.35 lbs. |
$0.28 |
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Potassium |
$0.41/lb. |
0.20 lbs. |
$0.08 |
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Total Cost |
$0.36/bushel |
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Note: Remember to remove the nitrogen cost when calculating the cost of Phosphorus in mixed fertilizers. Only the Phosphorus portion of DAP is used in the above calculation.
Calculate the grain removal by multiplying $0.36/bushel by 134 bushels (reference Table 3) to find the grain removal value of $48.24/acre. The total fertilizer cost to the seller would then be $95.80 - $48.24 = $47.56 per acre or $2.38 per ton.
If the nutrient removal will be used in price determinations, it is important to define in the agreement what fertilizer prices will be used in the calculation. Ensure that the calculation listed in the agreement will also reflect harvested yields.
Other Opportunity Costs to the Seller
Another consideration is that the seller will save on the cost of harvesting, storing, and drying the grain. Typical custom rates can be used to estimate these costs. For example: combining ($60 per acre) + hauling and storing grain ($0.05 x 134 bushels) + drying costs ($.20 x 134 bushels) = $93.50 per acre.
The net cost to the seller would then be the gross revenue of the grain ($502.50/acre) plus the lost nutrient removal ($48.24/acre) minus the harvest savings ($93.50/acre). Using our example, this would result in a value of $457.24/acre or $22.86/ton from this 20 ton yield. This would be the minimum bid the seller can afford to accept.
For assistance in calculating a more detailed estimate of silage prices, consider Iowa State’s Corn Silage Price decision tool at: https://www.extension.iastate.edu/agdm/crops/xls/a1-65cornsilagepricer.xlsx.
Feed Value to the Buyer
The buyer should estimate the value of corn silage based on the value of the feed it will replace. This will be the buyer’s maximum bid price.
For example, if the grain yield would have been 134 bushels per acre and the price of corn is $3.75 per bushel, the grain component of the silage is worth: 134 bushels x $3.75 = $502.50/acre. This accounts for 50% of the total value.
The other 50% of the silage dry matter can be assumed to be stover. The value of stover can be calculated as follows, if the current price of grass hay is $100/ton:
- 20 tons of silage x 50% forage = 10 tons stover
- 10 tons x (35% silage dry matter / 90% hay dry matter) = 3.89 tons of hay equivalent, at $100 / ton = $389.
The combined feed value of the silage is: $502.50 (grain) + $389 (stover) = $891.39 /acre or $44.57/ton of silage for a yield of 20 tons per acre.
If the buyer must also harvest the silage, the feed value should be reduced by the cost of harvesting. Keep in mind that for the buyer, harvest costs for silage would be different than harvest costs for grain. For example, if the custom rate for chopping, hauling and storing silage is $10.00 per ton, the value of the standing silage to the buyer is reduced to $44.57- $10.00 = $34.57 per ton, or $691.40 per acre. If the standing corn is a significant distance away, additional transportation costs should be considered in the harvest cost portion of the calculation.
Risk
Lower than expected yields or weather delays lowering quality can greatly reduce the net gain of purchasing standing forages. Producers need to adjust numbers in these examples to reflect current market conditions, yield and harvest timeliness. The value of risk is difficult to estimate but can be based on a typical value of the desired forage quality.
Contracts signed well before harvest and full season contracts should reflect a lower price due to the greater risk the buyer is assuming. In contrast, an agreement made close to harvest would be much closer to the current forage price because the buyer knows the status of the crop being purchased.
Note: Negotiations should outline whether the setting of marketable yield and average price already reflects the vulnerabilities of producing forages or whether an additional adjustment is needed.
Fine-Tuning the Price
The buyers of standing forages are often livestock producers who may be willing to spread manure on fields where the forages are harvested. The economic value of manure as a replacement fertilizer should be taken into consideration. Often, the purchaser’s price is adjusted for the reduction in the seller’s fertilizer expenses (i.e., based on nutrient removal).
Opportunities may also exist for buyers to custom harvest the seller’s other crops. This provides convenience and value to both operations. The value to both operations should be considered in determining the price of standing forage. Especially for farms with smaller equipment or absentee landlords.
Final consideration
A written agreement prior to the start of harvest is recommended. Agreements should include price, payment due date, method of determining yield when selling by the ton, and other pertinent factors. A written contract clarifies the sale agreement for all parties. Written contracts also provide a record to eliminate differing memories of what was agreed to later on.
Author’s note: Many of the concepts and some of the language in this article are adapted from “Pricing Forage in the Field” by William Edwards and Chad Hart, Iowa State University, Department of Economics Fact Sheet, September 2018. However, there are some significant differences in approach.
