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cowboy43

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For 3 years I have bought hay from neighbor friend who has 20 acres coastal (he has no cows), every year he fertilizes and weed sprays anad has custom baled. It has been an oral hand shake type of deal that I buy the hay and the price is discussed at time of bailing. My problem this year he has $1000 fertilizer invested in 20 acres plus $25 a bale for baleing, because of the exceptional drought ( worst in history) the hay is poor quality and they baled 22 bales today. We have not discussed the price as of yet but it looks like he has about $71.00 per bale invested. MY concience tells me to buy, but my business sence tells me no. I am from the old school where my word and friendship is very imporant to me, so I am wrestling with what to do. What would you do?
 

kenny thomas

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Was there ever a year that he sold hay to you cheaper that market price? Is his price above everyone else in your area for the same quality hay? If not remember the cheap year as you pay him. It is hard to keep a good supply of quality hay so if you have to give too much one year it might still be worthwhile. Can't expect him to sell below cost of production. Sure seems high though.
 

LoveMoo11

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Since you have a drought, will other producers have similar prices? If not and you can get it cheaper and really can't spend extra money buying from your friend, explain the situation to him. Or, buy a little from him and the rest from a cheaper source if it makes you feel better. It may be best to buy it if you think you want to have a business relationship with him in the future. Guess it depends how good of friends you guys are.
 

1982vett

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When hay is harder to find you will probably pay that or more if you really need it. On the other hand, if the drought breaks and hay is abundant then it isn't worth the $71. Now, their is a big difference between $71 for a 4x5 roll and $71 for a 5x5 or 5x6. Without knowledge of certain parameters one has to make up their own. Kind of like asking if a weaned calf is worth $550. Might be and might not be.

I'll add this to LoveMoo11's answer. If you were dealing with me, I would have my hay priced to make at least a small profit. I no longer subsidize feeding someone elses cattle. If it means I have to put it in the barn and feed it myself that is fine. Maybe your friend doesn't have that option, I don't know. But since you have bought hay from me before you would have first refusal before I would be selling it to a new customer. However, if you do turn it down and a new customer comes along you risk being put behind the new customer next time also.
 

grannysoo

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I've never had a $71.00 cost basis in my hay, but I have had a $51.00 cost basis before. (And that was in a 4x5 roll). Drought changes things. It changes the quality, it changes the price. The down side to that year was the fact that I had $51.00 cost per roll in the hay. The up side to that year was that I sold all I could to a wholesaler at $65.00 per roll.

Hay was so scarce that year that it was getting imported from anywhere that it could be found. You may be in the situation where $71.00 is a bargain, even for bad hay.

I've seen hay for $25.00 per 4x5 roll, and I've seen hay for $110.00 per 4x5 roll. Conditions and markets change. That being said, the day of the $25.00 roll of hay is over...
 

Texas PaPaw

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Due to the drought, it is most likely that a good portion of the fertilizer applied is still in the soil and will be available for additional hay, when it does rain. I don't think you should pay him for that. It is a business fact of life that in unusual production situations (drought etc), production costs can often significantly exceed current market value.

If it were me, I would find out what the current prevailing price is for similar quality & size bales.
Also determine, prior to discussing price, what, if any "friendship premium" you would be willing to pay. If he prices his hay within your parameters, I would buy his. If he is significantly overpriced and will not accept the going price + any "friendship premium", you may need to purchase your hay elsewhere.

Calculating the maximum you will be willing to pay before you discuss price with him will take a lot of the emotion out of your negotiation. Since you have had an amicable relationship in the past, you will probably be able to reach an agreeable price.
 

Jogeephus

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Texas PaPaw":2nrkc8sd said:
Due to the drought, it is most likely that a good portion of the fertilizer applied is still in the soil and will be available for additional hay, when it does rain.

I agree. I'm also wondering why he even cut it if it was so sparce. I would have just let it lay there till it got some volume.
 

1982vett

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Jogeephus":2dssijrz said:
Texas PaPaw":2dssijrz said:
Due to the drought, it is most likely that a good portion of the fertilizer applied is still in the soil and will be available for additional hay, when it does rain.

I agree. I'm also wondering why he even cut it if it was so sparce. I would have just let it lay there till it got some volume.
Got to clean it up so when it rains-------------------
 

Jogeephus

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Why is that? What kinda grass are we talking about. (I thought about this after I posted) With bermuda, I don't buy the part about it shutting off after it heads out - other grasses may be different.
 

1982vett

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Coastal, I think. I guess it would depend on how much it shut off and how dry it gets. Ours would have been a mess if we had not cut it and cleaned it off but we did make 2 bales instead of a little over 1.
 

Jogeephus

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A year or so ago when we had a real bad drought everyone told me I needed to cut mine to make it grow. I just couldn't see spending the money but I also didn't want to screw up. (I had never experienced such a severe drought in my life.) So I compromised and cut half of it. When we did get rain the non cut bermuda just took off and I got a wonderful cutting in no time. I kept a log of what I cut off each field and the fields that I did not cut yielded better with less cuttings. I know I won't ever cut it again just for the sake of cutting it. Fuel is just too high to run all that equipment for a roll per acre. I do think much of the fertilizer will be there on the next cutting. JMO
 
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cowboy43

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We settled on $55 a bale , he's hoping for rain to get another cutting and make up the difference, the baler charged him $28 to bale and wanted to charge extra per acre to cut but after discussion decided against it.
 

Jogeephus

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Hopefully you will get some rain and the fertilizer will still be there and it will average out for everyone concerned. Seems to work this way. I know one of my cuttings during the drought chalked up about the same cost per bale but then the next one I had next to nothing in it so it all worked out in the end. Good luck and hope the rain gets to you.
 
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