Determining Implicit Prices for Hay Quality and Bale Characteristics

Abstract

Markets for dairy quality hay have emerged as dairy farms purchase more feed off the farm. Previous research on hay markets used proxies for quality since objective measures of quality were unavailable. A hedonic pricing model incorporating direct measures of quality (moisture, crude protein, and relative feed value (RFV)), proxies (cutting), and bale-type variables was estimated using data from a hay auction. Large round and square bales and medium round bales were discounted relative to small square bales. The implicit price for RFV was $0.55/ton in 2001-02. S tructural change in the U.S. dairy industry has led to the emergence of a growing market for quality hay. High-quality hay in dairy rations is required for greater milk production. Many large dairy farms now purchase all feed inputs, including hay, rather than producing feedstuff on the farm. The shift from traditional dairy farms that produced most or all of the hay on the farm to large dairy farms with high production levels per cow has resulted in a demand for high-quality forages. The purpose of this study is to estimate the implicit values of quality and packaging characteristics associated with high-quality hay in a major dairy area.Understanding the characteristics of the emerging hay market has far-reaching implications for both dairy and crop producers. Sourcing an adequate supply of dairy-quality hay in a bale type that suits dairy operations will become a more important for farmers who outsource cropping. Dairy farmers exiting the industry could be in a strong position to supply hay to dairies. Row crop producers interested in diversification could include alfalfa in the crop rotation. Maynard, Harper, and Hoffman quantified the economic benefits of such a strategy. Understanding how hay quality and packaging impacts price is an added dimension to the decision of including alfalfa in cropping decisions and machinery purchase decisions.

Effects of drought on hay and feed grain prices

“…Transaction costs include other costs that occur due to the exchange of goods, for example finding sellers or buyers and quality verification. Hay, an important feed source for the dairy and beef sector as well as for horses (Vanselow et al 2012, LfL 2018, is a bulky commodity of varying quality; it has a low per ton protein unit, is usually not transported over great distances and relatively low quantities are traded (Rudstrom 2004, McCullock et al 2014. Thus, hay markets are rather regional, with relatively low transparency and a lack of formal market exchanges.…”

Valoração de atributos de qualidade em pêssegos comercializados no estado de São Paulo

“…Pressupondo-se que o mercado está em equilíbrio, os modelos de preços hedônicos modelam efeitos de formas reduzidas que mostram como os atributos ou características de qualidade afetam o preço de commodities (neste trabalho, pêssego) em um mercado competitivo. O cálculo do preço implícito de cada atributo de qualidade foi obtido a partir das funções, baseadas em Rudstrom (2004). Segundo a autora, o preço implícito de uma característica corresponde à variação monetária no preço do produto, em função de uma variação de unidades na característica ou atributo, no caso de variáveis contínuas, ou em função da presença da característica, no caso de variáveis binárias.…”

Characteristics and hedonic pricing of differentiated beef demands

“…An additional way to address quality issues in a seemingly homogeneous product is to examine the value of characteristics embodied in such a good (e.g., Atrostic, 1982; Bajic, 1993; Coatney, Mehkhaus, and Schmitz, 1996; Rudstrom, 2004; Bajari and Benkard, 2005; Chavas and Kim, 2005). In this framework, a good or commodity at time t , x t , consists of a set of K characteristics, z t ={ z 1 , z 2 , … , z K }, that are not directly priced in the market place, but which contribute to the total value of the good.…”