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If you own land well-suited for hay production, consider one main obstacle removed. However, purchasing hay-growing equipment -- at a minimum you'll need a tractor, mower, hay rake and baler -- is costly and will likely prevent you from earning a profit your first year or two in business. A hay business depends on two things: cooperative weather and a reliable customer base. You can get by with fewer acres in a climate that grants you several cuttings per year, and an eager customer base guarantees fast-paced sales that can reduce or even eliminate your storage requirements.
Hay is grown in all 50 states, although the type of grass varies by geographical region.
New or Used Equipment
You can easily spend $100,000 on the the newest and greatest machinery. Shiny, new farm equipment has advantages, such as fewer breakdowns and factory or dealer warranties. However, any profit you make for the first few years, depending on your acreage and yield, goes directly to the cost of this equipment, so the more you spend the longer it will take to recoup that cost.
A more affordable option is purchasing used equipment. Social media and online sales sites, such as Craigslist, are resources for finding used farm equipment. Look out for farm equipment auctions in your area. Purchasing used equipment can save you 50 percent or more on upfront capital start-up costs.
Hay can be baled in small, rectangular bales, or large round rolls. Each type requires different baling equipment.
You can rent the equipment, but ongoing rental costs reduce your profits each cutting -- the time when your hay is ready to harvest -- rather than those costs eventually being paid off over time.
Renting the equipment your first year only is a viable option until you establish a reliable customer base. Hiring someone to do the seeding can save you from purchasing seeding equipment, because hay fields only need to be seeded every few years.
It's All About the Land
Your land may not be your biggest cost, but it is a requisite. You can circumvent a land purchase by finding hay acreage to rent, but this will also cut into your profits as a recurring cost rather than a one-time expense. Land sale prices vary widely by region; a Texas hay entrepreneur may spend twice as much per acre than his North Dakotan counterpart, but think in the thousands, rather than hundreds, of dollars per acre, regardless of where you are.
Price per acre is typically lower the more acreage you purchase.
You don't need hundreds of acres to start out. In fact, with today's equipment designed for small, hobby farms, you can grow and harvest on less than 10 acres. But, depending on your growing season, you'll likely have to charge more per bale than a competitor farming 10 times that size. And your production will be lower, which limits your customer base.
Assess your available customer base to determine how much land to buy. If you know demand is high, and you're a reasonable distance from farm feed stores, horse owners or horse boarding facilities, you have plenty of selling options. Query a feed store owner or horse boarding operator about monthly usage, then calculate the required minimum acreage to meet that based on average yields in your area.
Per Acreage Yield
According to Roger Johnson, president of the National Farmer's Union and a third-generation North Dakota farmer, hay yield is calculated in tons, as individual bale weights can vary. Your yield depends on the type of grass used, as well as soil and weather conditions. Typically, though, expect between one and two tons per acre per cutting. Typical square bales weigh from 50 to 100 pounds, while round bales easily weigh in at 1,000 pounds and up; you're not likely to get more than 50 smaller square bales per acre, and only one to two round bales.
You can sell to feed stores or large-scale customers by the ton, which can minimize concerns about variations in individual bale weights.
One thing to consider when determining how much land to purchase is your climate: A hay producer in the North is likely to get only two cuttings per year, while one in the South may get three or four easily -- sometimes more. Thus, the Ohio hay producer on 50 acres may only yield two to four tons per year, while the Texas farmer gets twice that.
One advantage to hay farming is that you may only need to seed your land every two to five years, so consider seed an occasional cost of at least $100 per acre. What you do need to do to ensure consistent quality, is fertilize your hay crop. You also need to factor in the minimal fuel costs for cutting and baling. While all of these costs are affected by external factors and geographical regions, make preliminary estimates of at least $200 to $300 per acre for fuel and fertilizer.
Calculating Your Profit
How much profit you can expect per bale is dependent on several factors, from where you operate, to the weather in a given year. Before going into business, survey growers in your area to gauge their wholesale prices to retail or individual customers. This price may also vary depending on whether the hay is delivered. For example, in 2015 in Central Texas, hay growers may sell square bales to individual customers for $6.50 per bale if the customers pick it out of the field, $7.50 after the hay producer has loaded it and stored it in a barn, and $8.50 or more if delivered. So, using an example of 50 acres with two cuttings per year, yielding 50 bales per acre equals 5,000 bales total. Your fertilizer and fuel are $300 per acre, or $15,000, which is $3.00 per bale. Not including any of your capital equipment purchases or other upfront costs, such as seed that year, anything above $3.00 per bale is your profit, and you can set your sales price above that according to what your particular market will bear.
Things That Go Wrong
Timing is everything in any type of farming; one thing you'll get used to is worrying about the weather. Too much rain, rain at the wrong time and drought are your enemies. An even bigger issue, according to Johnson, is rainfall after cutting but before baling. "The hay loses quality, color and weight, and chances of mold increase if it's wet for too long or if the climate is warm and humid," said Johnson. Pests and weeds are also a concern, so some years may include additional costs for pesticides and weedkiller.
Mold and mold spores are extremely toxic to horses.
You need a storage building for your bales to keep them dry if they are not purchased directly from the field, or if you don't deliver them to customers immediately after baling them.