Placing a Value on Soybeans for Forage
By Tom Kriegl, Farm Financial Analyst , Randy Shaver, Extension Dairy Nutritionist, Roger Borges, Extension Soybean Specialist University of Wisconsin-Extension
September 26, 2003
The Feeding Value and Pricing of Drought-Stressed Full-Fat Soybeans
Soybean growers in drought-stressed areas of Wisconsin will not only face yield losses, but also price dockages when attempting to sell through commercial trading channels because of small seeds and low-test weights. This has created much interest in the potential for feeding drought-stressed full-fat soybeans to dairy cattle.
Because of likely variation in test weight and nutrient content, trade and feed drought-stressed soybeans on a weight and nutrient basis rather than on volume basis. Drought stress may change soybean composition and nutritional value, so nutrient testing can help to most accurately price and feed drought-stressed soybeans.
The crude protein in raw soybeans is highly degradable by rumen microbes in the cow's rumen and raw soybeans contain trypsin inhibitor that limits protein digestibility in the small intestine. For these reasons, raw soybeans should only be fed at up to 4 pounds per cow per day. Raw soybeans should not be fed to replacement heifers less than four months of age. At feeding rates up to 4 pounds per cow per day, raw soybeans can be fed whole without physical processing.
Soybeans can be roasted either off-farm at a feed mill or with a mobile roaster on-farm when one is available locally. Roasting reduces ruminal degradability of the protein and deactivates the trypsin inhibitor, thereby allowing a higher feeding rate for roasted than raw soybeans. For high-quality roasted beans, the temperature of beans in the auger coming from the roaster should be 280-290 degrees F and then should be held or steeped at 250-260 degrees F for 30 to 60 minutes. Roasted soybeans can be fed at up to 8 pounds per cow per day depending on the need for supplemental protein in the diet to meet cow requirements. Feeding roasted soybeans whole will result in a portion of the beans passing undigested into the manure. Although, grinding reduces fecal excretion of soybeans, it also increases the ruminal degradability of the protein. Coarsely roll roasted soybeans to contain mostly half and quarter pieces.
So what are drought-stressed soybeans worth?
If sold through normal markets, drought-stressed soybeans will be heavily discounted. However, a transaction between soybean growers and dairy farmers can likely recoup more value than the discounted price for the growers and still provide a good value to dairy farmers. Below is an example of a procedure to establish a price floor for the seller and price ceiling for the buyer and eventually establish a price reasonable to both buyer and seller.
Establishing a price floor for the seller.
Let's assume the market price for #2 yellow soybeans is $6.00 per bushel, and the discount for the drought-stressed beans is $1.00 per bushel. The soybean grower can take a sample of the beans to the grain market to determine the amount of the discount before selling the soybeans. Next assume that the combined drying and handling/transportation cost to the grower is $0.50 per bushel if sold to market and $0.20 per bushel if sold to a dairy farmer. If the drought stressed soybeans were sold to market, the grower would realize a “net price” of $4.50 (discounted price of $5.00 minus the $0.50 per bushel combined drying and handling/transportation cost) per bushel from the transaction. Soybean growers would need a minimum price of $4.70 from a dairy farmer to be as well off as selling to the market ($4.70 from the dairy farmer minus the $0.20 combined drying and handling/transportation cost equals the “net price” of $4.50 from the market). So, $4.70 is the price floor for the grower in this example. The growers only have the two alternatives mentioned above, unless they have their own livestock.
Establishing a price ceiling for the buyer.
Establishing a price ceiling for the dairy farmer can be more complicated, because a dairy farmer has many more alternatives to using drought-stressed soybeans than the grower has for marketing them. To simplify the example, let's assume the dairy farmer wants to feed whole soybeans and is willing to consider drought-stressed soybeans as a substitute for #2 yellow soybeans if the price is competitive. Further assume that #2 yellow soybeans can be delivered to the dairy farm for $6.00 per bushel. The dairy farmer would not be willing to pay more than $6.00 per bushel for drought-stressed soybeans. In fact, the ceiling would be less because the drought-stressed soybeans may have a slightly reduced nutrient content. To determine how much less the dairy farmer's price ceiling should be, the nutritional content of the soybeans could be tested and then applied to the UW FEEDVAL4 program found at http://www.wisc.edu/dysci/uwex/nutritn/spreadsheets/sprds.htm. Alternatively, one could assume that the feed value of the drought-stressed soybeans is some percentage less and reduce the $6.00 price by that percentage. Assuming a five percent reduction in feed value, the price ceiling would be $5.70 per bushel ($6.00 times 95%). If the buyer and seller are aware of both the price floor and ceiling, they will negotiate a price somewhere in between. The actual transaction price will depend on a number of factors including each person's negotiating abilities etc. In this example, if they choose to split the difference evenly, they could agree on a price of $5.20 per bushel ($5.70 plus $4.70 and the total divided by 2) based on known weight and moisture content.
Remember that the prices used above are examples. With all of the variables involved in pricing drought-stressed soybeans, it is important to use a procedure like that illustrated above to determine the appropriate price in your case.
With financial support from the WI Soybean Marketing Board, the UW Department of Agronomy is offering free protein and oil analysis of soybean grain. To request a test kit, contact Colleen Smith at clsmith8@wisc.edu or at (608) 262-7702.
