Oklahoma State University|
ALFALFA QUALITY AND HAYMARKET PRICES
This article addresses the relationship between sale price from HAYMARKET sales and various objective measures of alfalfa quality, i.e. RFV (Relative Feed Value), TDN (Total Digestible Nutrients), Protein, ADF (Acid Detergent Fiber), and NDF (Neutral Detergent Fiber). This note provides some further information from the 1992-93 HAYMARKET data. Several regression models were estimated. Results presented here represent those which were judged to fit the data better than others.
Before we look at the quality factors mentioned above, let's look at bale type and percent of weeds and grasses in alfalfa sold. Keep in mind that data analyzed were for a single year and results may differ for a different time period.
Bale Type - Small rectangular bales were used as the basis for comparison. Large square bales were price discounted $8-10/ton compared with alfalfa hay sold in small rectangular bales. Round bales were price discounted $11-19/ton compared with small rectangular bales. The discount for round bales was not surprising but the size of the discount for large square bales was somewhat surprising. Without additional information that price difference cannot be explained here. If you have some insight into the price difference, let me know.
Weeds and Grasses - Alfalfa hay with less than 5% weeds and grasses was chosen as the basis for comparison. Buyers significantly discounted alfalfa hay with larger amounts of weeds and grasses. Hay sold with 5% or more weeds and grasses was price discounted over $19/ton. In some equations, the price discount was $30-33/ton. Whether the correct figure is $19 or $33, the signals buyers are sending is clear. Buyers are looking for alfalfa hay which is nearly free of weeds and grasses. Growers have a price incentive to keep their alfalfa free of weeds and grasses, in addition to the incentive to control weeds and grasses and extend the stand life another year or more.
Quality Measures - Buyers have several objective measures of alfalfa quality for each sale lot of alfalfa listed on the HAYMARKET printout; for example, RFV, TDN, Protein, ADF, and NDF. There was little difference in the regression results for RFV, TDN, ADF, and NDF. However, each of those equations differed somewhat from the equation for protein.
Below is how much HAYMARKET prices changed in 1992-93 with a one unit increase in each quality measure.
One % increase in
increase in price
As expected, when protein, RFV, and TDN increased, so did the price buyers were willing to pay for alfalfa. Likewise, as ADF and NDF increased, the lower the price for alfalfa. ADF and NDF are the two factors used to compute RFV. Therefore, it is natural that there would be an inverse or opposite relationship between RFV and both ADF and NDF.
The March newsletter contained the following simple correlation coefficients between price and each quality measure.
Price vs. RFV +.68
Higher numbers mean a closer relationship between the two variables. Negative numbers indicate an inverse or opposite relationship.
It seems to me that alfalfa growers must know the quality of their alfalfa before they can know its price. To do that, growers must have their hay quality-tested. If you do not know the quality of your hay, you cannot know whether you are asking enough or too much.
FOR MORE INFORMATION:
E. Ward, Extension Economist
Department of Agricultural Economics
Oklahoma State University