Economics of Baling Wheat Straw
As wheat harvest quickly approaches, there may be an opportunity to improve profitability by baling the straw. Wheat straw is in high demand, especially in the Central Bluegrass region, as bedding for the horse industry. Recently, square bales of straw, both small and large, are getting harder and harder to find. Unfortunately, the primary wheat producing areas of the state are a far distance from the Central Bluegrass region, resulting in high transportation costs. However, due to high demand and low supply, it may be worth the time and effort.
Baling wheat straw is unique compared with baling hay. It is common for the baler to follow the combine as it is harvesting wheat for grain (or soon after). The combine will have the shredder fans turned off, and wheat straw is windrowed for baling. Therefore, baling costs will be less than hay since mowing, raking, or tedding are not required. In addition to the baling costs, there are costs associated with handling and moving the bales in the field, hauling bales to market, and the value of nutrients removed from the soil due to baling the straw. According to the University of Kentucky AGR -1 Lime and Nutrient Recommendations, the baling of wheat straw removes nitrogen, phosphorus, and potassium at a rate of 12 lbs, 4 lbs, and 20 lbs per ton of straw, respectively. Thus, as commercial fertilizer prices fluctuate, so would the cost for baling wheat straw.
Table 1 and Table 2 below estimate the costs for both small and large square wheat straw bales. Included in each table is the estimated ownership cost of baling wheat straw, as well as the custom hire cost. The nutrient removal costs are based on collecting one ton of straw per acre, the removal rates above, and the current cost of urea ($340/ton), DAP ($454/ton) and potash ($325/ton). All custom hire rates are based on the 2018 Custom Machinery Rates Applicable to Kentucky. Ownership costs for baling and hauling are based on $15/hr for labor and $2.50 fuel price. For both baling scenarios, it was assumed to be used 100 hours per year. Also, two hauling scenarios were examined. The cost were calculated for hauling 35,000 lbs of straw a distance of 100 miles and hauling 200 miles. The total costs indicate that regardless of the scenario, large squares cost less per ton than small. However, the demand is higher for small square bales due to the ease of handling when used for bedding. Furthermore, it is cheaper to custom hire baling of large bales versus owning the equipment and only operating the assumed 100 hours annually. Therefore, use both tables as a guide for estimating the cost of baling wheat straw and compare to the current market price to determine if an opportunity exists. Look forward to a decision tool that will available which calculates costs based on your baling scenario.
View more stories in the latest Economic & Policy Update.