AgDM newsletter article, June 1998

Small square or large round bales

Ralph Mayerby Ralph Mayer, Extension Farm Management Specialist, 515.842.2014, mayer@iastate.edu

Does it pay to put hay up as small square bales instead of large round bales? In recent decades there has been a major shift towards large round bales because they are easier to handle and can be done with a minimum of physical labor. But which method should you use if you want to generate the highest net return? The information below helps provide an answer to this question.

Auction sales

Auction markets in southern Iowa have demonstrated a willingness by buyers to pay more for square bales than for large round bales (large square bales tended to more closely approximate the value of small square bales then large round bales.) A review of hay auction sales in southern Iowa for the year ending in March, 1998, indicates the average price paid by buyers of good to premium quality hay in large round bales was about $72 per ton, while similar quality hay in small square bales averaged about $116 per ton. There are a variety of reasons a buyer may be willing to pay more for small square bales including perceived feed value, convenience, ease of hauling, etc.

Costs of Production

Although there is a consistent difference in sale value, how do the costs compare for each type of bale? Some costs will be the same for both bale types while others will vary. Costs that will be the same for both methods include land rent (land charge), the costs of seeding establishment and annual fertility replacement. Costs that differ include harvesting and labor.

Returns

Assuming a four ton yield, net return is more than three times higher for square bales ($225) than for round bales ($70) as shown in Table 1. If yield is reduced to three tons per acre (which is more typical in parts of south central Iowa) the net return from square bales ($131) is more than seven times higher than the return from round bales ($18).

Table 1. Estimated Hay Returns by Baling Method*
(3 cuttings & 4 ton yield) (returns per acre per year)

Large Round

Small Square

Auction price per ton

$72

$116

Tons per acre

4

4

Gross value per acre

$288

$464

Costs remaining the same by method

1/3 of establishment cost

$33

$33

Annual fertilizer replacement

45

45

Land rent/charge

55**

55**

Sub-total

$133

$133

Costs that vary by method

Mow-conditioning, raking,

$57

$68

baling, hauling

Hours of labor

4

5.4

Labor @ $7/hr

28

38

Sub-total

$85

$106

Total cost per acre

$218

$239

Net Return per acre

$70

$225

*Estimated costs are taken from Decision File 1998 Iowa Crop Production Cost Budgets, Decision File 1997 Farmland Cash Rental Rates, and Iowa hay auction reports for the year ending March, 1998.
** Land rent/charge was the average alfalfa hayland rental rate reported for south central Iowa in 1997.

Conclusion

This comparison suggests there is merit in examining local hay markets and methods of hay handling for greatest net returns. For some operators the continued use of round bales meets their goals, but for others the potential increase in returns from producing small square bales is worth investigating.

 

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