We often talk about the importance of filling the winter feed gap. Traditionally, the answer is simple: cut hay in the spring when pasture peaks and feed it back during the winter slump.
However, many producers find that while they expect a significant profit from marking hay, the actual cash never seems to stay in their pockets. In a recent case study involving a 60-hectare paddock, we identified seven major problems that prevent them from making an extra $19,000/yr.
1. The False Economy of Hay
The first major hurdle is failing to segment the farm into distinct sub-businesses. If your “Hay Enterprise” sells hay to your “Feedlot Enterprise,” it must do so at market value. If you don’t account for this opportunity cost, you are operating in a false economy; you might have been better off selling that hay on the open market rather than feeding it to livestock that provides a lower return.
2. Underestimating Direct Cash Costs
Many growers only calculate fuel and twine as the cost of hay. To get a true economic understanding, you must include:
Repair and maintenance costs for the machinery.
Labor costs, including paying yourself a wage for the hours spent on the tractor.
3. Nutrient Removal
Every bale of hay exported from a paddock is a physical removal of minerals that have a real replacement value. In our case study, one harvest removed:
13.5 kg of Phosphorus: Equivalent to 153 kg of superphosphate.
90 kg of Potassium: Roughly 183 kg of potassium chloride.
Calcium: Equivalent to $12 worth of lime.
Totaling these minerals, the farmer was “exporting” $241 worth of nutrients per hectare. If these aren’t replaced, you are mining your soil’s natural capital.
4. The Opportunity Cost of Time
Time spent making hay is time you cannot spend on other, potentially more profitable, enterprises. If your labor return per hour is higher in grazing management than making hay, every hour on the tractor is a net loss for the business.
5. Heavy Capital Requirement
Making hay is capital-intensive, requiring tractors, balers, mowers, and windrowers. This machinery brings two heavy costs:
Depreciation: Equipment typically loses about 10-15% of its value annually.
Capital Opportunity Cost: The $133,000 tied up in equipment (as seen in our case study) could instead be earning interest in a bank or growing profit as additional livestock. The opportunity cost is about 10% of capital, or $13,300 in this case.
6. Soil Degradation and Compaction
Making Hay is arguably the next worst thing for soil after plowing. Between cutting, raking, and bailing, you may have up to four tractor passes over the same ground. This causes significant compaction, increases bare ground, and limits the long-term productivity of the paddock, these costs are rarely factored into a standard gross margin.
7. The Quality and Weather Risk
Unless you are a specialised hay producer with top-tier equipment, there is a massive risk that a poorly timed storm will ruin your hay while it’s drying. Often, it is safer and more cost-effective to buy in hay. Buying hay allows you to guarantee quality through analysis sheets while physically importing nutrients from someone else’s farm to yours.
Moving Toward a More Profitable Solution
For this specific client, the answer was to transition to regenerative grazing. By selling the hay equipment and grazing the pasture in the paddock, they eliminated the depreciation and labor costs associated with making hay. While utilization was slightly lower, the net economic profit was significantly higher.
It is important to know this was the situation for this particular farm and might not apply to your farm. I’m important however to do the analysis to know your economics. If you need help with this, you can sign up for a FREE Consult
