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Managing economic risk in grazing corn

Growing grazing corn is expensive, but managing risk can make it an economic alternative to swath grazing cereals.


November 19, 2007
By Top Crop Manager

Forage corn acres have gained plenty of coffee shop talk in the past few years.
After all, seeing cows out grazing standing corn in the middle of the winter
was not a common sight until a few years ago. After the frost impacts of 2002
and 2004, though, some farmers have been left wondering if the added expense
of growing corn is worth the risk. However, with the extremely favourable grazing
corn crop of 2005 tilting the scales back to grazing corn, just how do the economics
pencil out and what are the risks?

Lorne Erickson, forage systems beef specialist with Alberta Agriculture, Food
and Rural Development at Lacombe, says that to develop realistic economic numbers,
you have to be careful to compare real-world situations.

"We've done some economics and essentially, if we compare corn seeded
in mid-May, when it should be seeded in our short season area, with a cereal
seeded in mid-June for swath grazing, then corn starts to look pretty good,"
explains Erickson.

However, when corn is compared to a cereal seeded in mid-May for either silage
or greenfeed, then corn does not compare as favourably. "Corn doesn't yield
that much better under that situation and it costs more to grow it than cereal
silage," says Erickson.

When comparing costs of cereals and corn grown for silage or winter grazing,
cereals cost less to produce and corn costs more. No surprise there. In fact,
when corn silage is compared to cereal silage, corn can cost about $100 per
acre more to grow. But when harvest costs are eliminated, then grazing corn
costs come down to about the same as cereal silage, but still about $55 more
per acre than cereal swath grazing, according to Erickson's calculations.

At the Western Beef Development Centre at Lanigan, Saskatchewan, researcher,
Bart Lardner has looked at the economics of growing corn since 1999. His 2002
Grazing Corn Report found the cost of growing grazing corn to vary from $166
to $129 per acre. In that trial, his seed and fertilizer costs were lower than
EricksonÕs estimates. Unfortunately, frosts during the first week of August
2002 severely cut corn yields, so estimating grazing days was difficult.

Lardner also compared swathed corn and barley for backgrounding calves in 2003.
The costs for growing those crops were similar to Erickson's, at $155.62 per
acre for grazing corn and $92.16 per acre for swath grazing barley. He is now
into a two year grazing corn trial funded by Monsanto Canada, but the results
are not yet available for publication.

Table 1. Crop costs ($/ac) –
grazing and silage crops.
Crop cost Cereal silage Corn silage Cereal swath grazing Corn grazing
Seed 10 75 10 75
Fertilizer 40 40 40 40
Land, seeding, herbicide 40 40 40 40
Harvest* 70 110 10
Total crop cost ($/ac) $160 $265 $100 $155
*Harvest costs per acre based on
activity and yield. Source: Lorne Erickson, Western Forage/Beef Group.

Comparing apples to apples
If grazing corn costs more to grow, then the only way it makes economic sense
is if it out-yields cereal swath grazing – producing more cow days per
acre. Vern Baron, a forage physiologist with Agriculture and Agri-Food Canada
at Lacombe, says that when comparing forage grazing yields on the ranch, be
sure to compare the systems properly.

"One of the things people forget is that when the planting date is delayed
for swath grazing cereals, the yields of oats or barley drop off dramatically,"
explains Baron.

Research at AAFC Lacombe by S. Kibite shows that delayed seeding of barley
and oats reduce yield by about 40 percent compared with a mid-May seeding. That
reduction in yield starts to chew into the cost advantage of swath grazing cereals.

Baron's research at AAFC Lacombe over four years established average yields
of corn and cereal crops seeded in mid-May. He then estimated yields for the
small grain cereals if they were seeded in mid-June, with a 40 percent yield
penalty. He estimates that grazing corn can yield at least one ton more dry
matter per acre.

Erickson, Baron and colleague Arvid Aasen, a pasture specialist with AAFRD,
then looked at the potential length of grazing days, based on these yields.
Using an average consumption of 25 pounds of dry matter per day per cow, they
found that grazing corn had substantially more cow days per acre than swath
grazing small grain cereals.

When the cost of growing the crops is compared to the yield and grazing days,
Erickson says the cost per cow day pencils out favourably for grazing corn.
Swath grazed barley came in the highest at $0.70/cow/day, followed by corn at
$0.58, triticale at $0.56 and oats at $0.51.

At Lanigan, Lardner's backgrounding calf trials saw corn yield estimates in
early September 2003 at 5.67 tons per acre on a wet matter basis, compared to
1.86 tons per acre for the barley. The corn was seeded on May 30 and the barley
on June 16. The DKC27-12 hybrid corn was seeded at 35,000 seeds per acre on
30 inch seedrows, and Excel barley was sown at two bushels per acre on an eight
inch row spacing. Recommended production practices were used for both crops.

"I always tell producers that corn will cost $150 per acre more to grow,
but if you can manage to get 175 to 200 grazing days, then you can get costs
down to $1 per day, or maybe even lower," says Lardner. He includes grazing
expenses, such as fencing and watering, labour and fencing equipment and minerals
and salt.

Table 2. Actual and estimated corn and cereal
yields.

Crop Actual yield1, mid-May seeding Estimated swath gazing yield2,
mid-June planting
t/ac dry matter
Corn 3.95 3.95*
Barley 3.48 2.09
Triticale 4.38 2.63
Oats 4.85 2.91
1 Average over four years – Baron, Lacombe
Research Centre.

2 Seeding cereals mid-June. Estimated
yield 60 percent of mid-May yield to adjust for late seeding for swath grazing.
* Corn utilizes all of the growing season. No
yield adjustment.

Source: Western Forage Beef Group.

Lardner says that in the backgrounding calves trial in 2002/03, the swathed
grazed corn came in at $0.98 per pound of gain, while the swath grazed barley
was $1.03 per pound. If the corn had been left standing, $10 per acre could
have been shaved off the corn expenses.

What about risk?
Risk management comes down to assessing the crop production costs, potential
yield and dependability of yield. Corn wins on yield potential, but costs more
to grow, resulting in similar costs per cow day of corn at Lacombe, and similar
cost per pound of gain at Lanigan. The remaining risk variable, dependability
of production, is still being sorted out. The frosts of 2002 and 2004 certainly
hurt yields of all swath grazing crops, but the large corn yields of 2005 point
to the crop's potential.

A clue to the dependability of yield lies in 'corn heat unit' maps. Lardner
says the 30 year average at Lanigan in east-central Saskatchewan is around 1900CHU.
However, that has ranged from 1600CHU to 2600CHU before the first fall frost.
He says that for grazing corn, good cob development is necessary so there is
enough protein and 'total digestible nutrients' to get the cows through most
of the winter.

Table 3. Effect of late seeding on
grazing days (tons per acre dry matter).
Crop Yield 85 percent consumed Cow days @ 25lb DM/day
Corn 3.95 3.4 269
Barley* 2.09 1.8 142
Triticale* 2.63 2.2 179
Oats* 2.91 2.5 198
*Seeding cereals mid-June estimated
yield 60 percent of mid-May seeding.
Source: Western Forage Beef Group.

Many grazing corn hybrids now have CHU requirements in the 2150 to 2200 range.
But grazing corn requires about 200CHUs less than the corn's rating, since the
CHU rating is for grain corn maturity. That means areas with at least 2000CHU
may be able to dependably produce grazing corn.

"Yes, corn is a higher risk crop if you look at the dollar outlay. It's
a warm season crop that needs growing temperatures above 25 degrees C,"
says Lardner. "But here, if you can grow nine to 10 tons per acre on a
wet basis, then the risk starts to look lower."

Baron agrees with that assessment, and says that if you just look at risk as
total outlay of money versus a wreck in production like in 2004, then corn is
riskier. "But if you look at cost per cow day, then I think corn comes
out equal or better than barley at Lacombe," he says. "The probability
of a total wreck happening frequently is pretty low in areas with higher CHUs."

Lardner says that given the recent frost wrecks for grazing crops, he recommends
that grazing corn risk be managed by not putting all the eggs in one basket.
"Put in a portion of your grazing acres in corn and the rest in a grazing
cereal. In good years, you're going to do really well with the corn. In other
years, you have the risk covered if you have a wreck with the corn because you
still have some grazing barley to get you through part of the winter,"
he explains. "You need to manage risk in today's economic environment.
At the same time, you have to try to cut cost of production." -30-

Table 4. WBDC corn and barley grazing
expenses (backgrounding calves, 2002/03).
Crop production expenses Corn ($/ac) Barley ($/ac)
Field preparation (harrow and packing) 7.00 7.00
Seed 78.31 14.00
Seeding 14.00 14.00
Herbicide and application 11.53 12.38
Fertilizer 9.78 9.78
Swathing 10.00 10.00
Land rent 25.00 25.00
Total crop production expenses (A) $155.62 $92.16
Grazing expenses
Fence and water depreciation 1.10 1.10
Labour and equipment for fencing and hauling water 60.07 60.07
Minerals and salt 3.27 3.27
Total estimated grazing expenses (B) $64.44 $64.44
Total expenses (A + B) $220.06 $156.60
Total pounds gained per acre $230.73 $152.78
Costs per pound of grain $0.98 $1.03
Source: WBDC, Backgrounding calves
on swathed corn and barley, November 2003.