Determining the Economic Value of Corn Silage

W.P. WEISS
Department of Animal Sciences, Ohio Agricultural Research and Development Center, The Ohio State University, Wooster, Ohio

Corn silage is a very common ingredient in diets for beef and dairy cows, however, corn silage is not commonly bought and sold at the present time. In the future, as herds become larger and more specialized, more corn silage will be purchased from farmers specializing in corn production. Prices for many commodities fed to cattle (e.g., corn grain, barley, oilseed meals, etc.) are established by large competitive markets. It is unlikely that true markets for corn silage with many buyers and sellers will develop because corn silage cannot be shipped long distances (high water concentration and perishability). In the absence of a true market other methods must be used to establish a realistic price for corn silage.

Cows do not require corn silage; corn silage is simply a vehicle to deliver required nutrients to a cow.  Therefore, the true economic value of corn silage should mirror the economic value of the nutrients it provides. If we know market prices for numerous commodities and know the nutrient composition of those commodities we can calculate the market value of the nutrients. Once the market value of nutrients is known, then the economic value of corn silage can be determined as the sum of the market value of the nutrients contained in that feed.

Methods to Price Corn Silage

Several methods have been used to determine the price of corn silage. Perhaps the most common is to base the price of corn silage on the price of corn grain. For example:

7.7 times corn grain price ($/bu) = price of corn silage ($/ 1000 kg assuming 35% dry matter).

Equations such as this wrongly imply that corn silage and corn grain are fed for the same reason and are interchangeable in diets. The ‘Petersen method’ calculates the price of corn silage from the economic value of energy in corn grain and of protein in soybean meal. This method is flawed in that it assumes corn is the only source of energy available and soybean meal is the only source of protein available and that both are perfectly priced. Furthermore, it ignores the fact that corn silage provides more than energy and protein.

St. Pierre and Glamocic (1)  developed a method to estimate the market value of individual nutrients based on the current market price of many feeds (the more feeds entered, the more accurate the results) using a statistical technique called maximum likelihood. A computer program that makes all these calculations, called SESAME (version 2.0), is now available from Ohio State University Extension (Columbus OH 43210). Users enter either library values or their own values for nutrient composition. The program then calculates the $ value of each nutrient specified. If users do not have access to SESAME, Ohio State University Extension also calculates and posts the $ value of nutrients once every two months on the website http://dairy.osu.edu/bdnews/bdnews.html. Note that the $ values shown at that website are calculated from national markets (U.S.) and may differ from those in local markets.

Why is Corn Silage Fed?

Corn silage is an extremely common ingredient of dairy rations in most areas of North America. The widespread use of corn silage implies that it has certain competitive advantages over other feedstuffs. This means that over the long term, diets with corn silage must result in higher income over feed costs than do diets that include less commonly used feeds. More specifically, corn silage must provide certain nutrients at lower costs than do other feedstuffs. To accurately value corn silage, the important nutrients provided by corn silage must be determined. Cows require energy (expressed as net energy for lactation, NEL), rumen degradable protein (RDP), rumen undegradable protein (RUP), effective neutral detergent fibre (eNDF), and a host of minerals and vitamins. For determining economic value of corn silage, the value of the minerals and vitamins can be ignored with little loss of accuracy and for this article only NEL, RDP, RUP and eNDF will be used to determine economic value. Those four nutrients are the major nutrients influencing animal production and are responsible for more than 80% of total feed costs. Although these important nutrients cannot be measured by feed labs, they can be estimated (2) .

Average corn silage (2)  has 1.45 Mcal/kg of NEL, 45% NDF, 5.7% RDP, and 3.1% RUP (all values on a dry matter basis). Because of positive effects on rumen health, NDF mustbe described in terms of effectiveness, i.e., its ability to stimulate chewing. The NDF in brewers grains is not as effective as the NDF in properly made corn silage and the economic value of corn silage must reflect this difference. SESAME calculates the market value of eNDF and noneffective NDF (eNDF is always worth much more than noneffective NDF). A major reason for feeding corn silage (or any forage) is to provide eNDF and the market value of corn silage must include its value as a source of eNDF. Because of the importance of eNDF, the value of corn silage cannot be tied solely to the price of corn grain. For this example, the NDF in corn silage is assumed to be 100% (i.e., eNDF=NDF). If corn silage is chopped too finely, eNDF will be lower than NDF.

Market Value of Nutrients

The dollar value of nutrients is dependent on the prices of all available feeds within a given market. They are not constant and will vary across locations and time. The numbers used in this paper probably will not reflect your local conditions and are presented only as an example.

The market prices (Wooster OH, November, 2002) of several feed grains, byproducts, and hays (a total of 30 feeds) were entered into SESAME and nutrient composition from NRC (2001) were used. The program calculated the market value of NEL ($/Mcal), RDP ($/kg), RUP ($/ kg), and eNDF ($/kg) as shown in Table 1.

Table 1. The Concentrations (dry matter basis) of various nutrients (NRC, 2001) and market value of those nutrients based on prices at Wooster OH in November 2002.  These values are not constant and will vary across locations and time.

To calculate the market value of average corn silage (assumed composition equal to that in NRC)(2), the quantity of each nutrient in a metric ton of corn silage is calculated. One metric ton of corn silage with 35% dry matter contains:

1,000 kg (2,200 lb) x 0.35 x 1.45 = 508 Mcal of NEL

1,000 kg (2,200 lb) x 0.35 x 0.057= 20 kg of RDP

1,000 kg (2,200 lb) x 0.35 x 0.031 = 11 kg of RUP

1,000 kg (2,200 lb) x 0.35 x 0.45 = 158 kg of eNDF

The value of the nutrients in 1000 kg of corn silage is determined by multiplying the quantity of nutrients by their market value and adding them together:

508 Mcal of NEL x 0.06 = $30.48

20 kg of RDP x 0.024 = 0.48

11 kg of RUP x 0.410 = 4.51

158 kg of eNDF x 0.079 = 12.48

Total $/1000 kg = $47.95

This means that in the market from which the value of nutrients were determined, 1 metric ton of corn silage (35% dry matter) is worth about $48 when fed to the cow. If the selling price is greater than about $48/metric ton, other feedstuffs can provide the nutrients needed at a lower cost than can corn silage. If the selling price is less than about $48/metric ton, the corn silage is a good buy.

From the above example, you can also see the impact eNDF has on the value of corn silage. About 64% of the value of corn silage is from energy, 26% from eNDF and about 10% from protein fractions.

Pricing Standing Corn for Silage

The above method works for corn silage that is ready to feed. It has been harvested, fermented, and a sample has been analyzed for nutrient composition. Standing corn is often purchased prior to chopping for silage. Because of inadequate data, price estimates for standing corn are inherently less accurate than pricing silage that has already been made. However, the method described above can still be used in the following manner:

1. Estimate nutrient composition. The NRC (2) gives average composition for immature, normal, and mature corn silage. Extension agencies and local nutritionists may have data on average composition of silages from a local area and under more specific situations. Attempt to find the best estimates of expected concentrations of NEL, RDP, RUP and NDF in the resulting silage.

2.Measure the dry matter of the chopped silage.

3. Estimate market value of silage using the method described above using measured dry matter.

4. Estimate the costs associated with chopping and storage. Several universities and extension agencies have developed budgets with average chopping and storage costs. In Ohio (these are not constant and will differ for specific situations) chopping corn costs $4 to $5.5 and storing costs $3 to $4/1000 kg of 35% dry matter silage. If you are purchasing chopped corn plants only storage costs have to be estimated.

5. Adjust for shrink. The amount of dry matter chopped will be greater than the amount of dry matter available for feeding. Dry matter is lost by fermentation and spoilage. On average about 10% of the dry matter is lost during fermentation and feed-out but this will be higher for poorly made silage.

6. Calculate the market value of the standing crop. Subtract chopping and storage costs from the market value of the silage, then multiply by 0.9.

Example: Using the data in Table 1 and a measured dry matter of 32%, 1,000 kg (2,200 lb) corn silage, not standing corn, has a market value of

1000 kg x 0.32 x 1.450 x 0.060 = $27.84 for NEL

1000 kg x 0.32 x 0.057 x 0.024 = $ 0.44 for RDP

1000 kg x 0.32 x 0.031 x 0.410 = $ 4.07 for RUP

1000 kg x 0.32 x 0.450 x 0.079 = $11.38 for eNDF

Total per 1000 kg (2,200 lb) at 32% dry matter = $43.73

From that value, chopping and storage costs are subtracted:
43.73 - 4.75 - 3.5 = $35.48

Multiply that value by shrink factor:
35.48 x 0.9 = $31.93.

In this example standing corn would be worth about $32/ 1000 kg (2,200 lb) at 32% dry matter.

Other Adjustments to Price

Dry matter: Wet silage (40% dry matter) ferments poorly and is prone to spoilage. The method outlined above does not account for these negative effects. Based on responses measured in research studies and a few assumptions regarding intake effects on milk production and feed: milk price ratios, adjustment factors (Table 2) can be derived to account for wet and dry silage (these adjustments are in addition to simply accounting for dilution with water).

For example, if the market value of corn silage with 26% dry matter was $40/1000 kg, its adjusted value would be 40 x 0.85 = $34/1000 kg.

Table 2.  Expected change in value for wet and dry corn silage.  The values in this table are multiplied by the market value determined as described above to obtain the final value for wet and dry silage.  A value of 1 = no adjustment.

Higher than average NDF digestibility (measured in vitro):  A major determinant of animal performance is the dry matter intake potential of a forage. Cows consume more DM when fed a diet containing a forage with higher in vitro NDF digestibility (IVNDFD). On average total dry matter intake increased about 0.14 kg (0.3 lb)and milk production (4% fat-corrected) increased about 0.25 kg (0.55 lb) per unit increase in IVNDFD (3). Assuming 1 kg of milk is worth twice as much as 1 kg of feed dry matter, the economic value of a 1 percentage increase in IVNDFD is worth about $5.4/1000 kg of corn silage dry matter (about $1.9/1000 kg of 35% dry matter silage). This factor is easy to apply when two silages are being compared (relative value). For example, if two silages were equal except that the IVNDFD differed by 5 units, the silage with higher digestibility would be worth 5 x 1.9 = $9.5/ 1000 kg (35% dry matter) more than the other silage. To determine absolute worth a standard or base IVNDFD is needed which at this time has not been established. However, hybrids with consistently higher than average IVNDFD are worth more than the value calculated above.

 

Refernces

1. St-Pierre, N.R., and D. Glamocic 2000. Estimating unit costs of nutrients from market prices of feedstuffs. J. Dairy Sci. 83, 1402-1411.

2. National Research Council 2001. Nutrient Requirements of Dairy Cattle. Natl. Acad. Press, Washington DC.

3. Oba, M., and M. S. Allen 1999. Evaluation of the importance of the digestibility of neutral detergent fibre from forage: Effects on dry matter intake and milk yield of dairy cows. J. Dairy Sci. 82, 589-596.