Pricing high-moisture grain
September 19, 2014
As the row crop harvest approaches, area grain producers may face storage and crop drying concerns. One possible solution is harvesting part of the crop as high-moisture grain and marketing it to livestock producers. High-moisture corn is an excellent feed for ruminant animals (e.g. cattle, sheep) and used quite frequently in South Dakota feedlots. Advantages to this approach include: no drying costs, harvesting earlier than field dry, utilization of an immature crop, lower field losses, and earlier availability of crop residue grazing. Disadvantages include: less marketing flexibility (only through livestock), the need for specialized storage facilities and equipment, and potentially higher spoilage and storage losses. Alternatives to high-moisture corn can include high-moisture ear corn (earlage) and snaplage (includes the grain, cob and husk).
The dilemma with selling high-moisture grain it is how to arrive at a value for the crop. One solution is to apply an adjustment to the cash price at the local grain elevator based on the moisture content. With earlage or snaplage, additional adjustments would need to be made. Grain buyers may use a variety of methods to calculate shrink, a term used to represent adjusting for excess moisture. One method to adjust for excess moisture is to mathematically "remove" the water and calculate what you are buying and selling on a dry matter basis.
Because corn is the most common crop marketed as a high-moisture commodity, it will be used in the example as follows: The industry standard moisture content is 15.5 percent, and the weight per bushel is 56 pounds. To calculate the dry matter in one bushel of 15.5 percent moisture corn, we would use the following formula: (1 – 0.155) X 56 = 47.32 pounds of dry corn/Bu.
That figure can be used to calculate the bushels of 15.5 percent moisture corn in a load of high-moisture corn. To keep the math simple, we will assume a load of 25 percent moisture corn weighs 1000 pounds. By using the formula: (1 – 0.25) X 1000 = 750, we have mathematically removed the water, and determined that 75 percent of the load of corn is dry corn, which weighs 750 pounds. By dividing 750/47.32 (pounds of dry corn/Bu) = 15.8, we know that the 1000 pounds of 25 percent moisture corn contains the equivalent of 15.8 Bu of 15.5 percent moisture corn.
If the buyer and seller agree on this method of adjusting for the excess moisture, they can determine the value of the 1000 pounds of high-moisture corn by multiplying the cash price per bushel of corn on that day by the equivalent bushels of 15.5 percent moisture corn in the load.
Since harvesting a crop as high-moisture grain involves an ensiling process, additional information for the buyer/receiver of the product is recommended. The buyer and seller may need to make adjustments for handling losses, storage requirements, trucking costs, etc. A computer spreadsheet is available to adjust loads of high-moisture grain to the equivalent number of bushels of the crop to the industry standard for pricing purposes. To obtain the spreadsheet, contact me at 605-842-1267 or firstname.lastname@example.org.
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