Important Considerations When Investing in Hay Ground

Not all hay ground is the same… 

Hay can be harvested almost anywhere grass grows, but that doesn’t make it all the same. Some of the “best” value of hay ground is mediocre ground with water rights, but high-quality soils might produce better yields and quality. However, the price due to productivity might be too high for some hay growers because other cash crops can be grown. For cattle ranches, clean, level meadows with simple flood irrigation systems might be the best ground for money. You can harvest a hay crop and then turn around later in the year and graze off the forage regrowth after being hayed which is great value for your land. The most important thing to consider is what hay program you are after and how it fits with the properties you are looking at. Also, having a basic understanding of the different values of a particular acreage of hay production will be pivotal in helping you determine the right property.   

Water Rights are important…most of the time. 

You can grow hay and forage without water; it’s not a big surprise here. However, water rights can vary even more than types of land, and it can be even more of a headache to understand water rights from property to property. The most important thing I can say here is to get help; either a water rights consultant or attorney will provide invaluable insight. A quality broker should lend their expertise but ultimately defer to point you in the right direction of an experienced water rights expert. Irrigation districts (a non-profit organization to help maintain and deliver water rights among users) make all our jobs easy, but it usually is an added expense to maintain districts and their employees, so don’t discount water rights that are straight from a body of water with no district oversight. And finally, remember that there are places where you don’t need water rights for production. There are places in Oregon where you can harvest a cutting of dry land alfalfa (Wallowa County), wild grasses (almost anywhere west of the Cascades in Oregon), and/or sub-irrigated meadows off creeks. These dryland hay acres are usually at a lesser value than acres with water rights and might be a great fit for you.  

How do you water? 

If you are looking for hay ground as an investment, whether to operate or lease out, you must consider: how do I move the water around? If you are short on labor, the property better have efficient irrigation that requires as little labor as possible, or you may need to consider some dry-land hay. Now, most people will consider pivots and linear as the most efficient irrigation systems, and for the most part, I agree. You can even run these systems off your phone in between sharing funny GIFs. However, I would not turn my nose up on a quality flood irrigation system. I saw 2000± acres of grass/clover fields very well irrigated by one person spending 90-120 minutes every other day with a flood irrigation system. In addition to the fact that you are more than likely doing this without the electrical expense of a pump, flood irrigation can be very efficient.  

Look for a hat… 

Depending on the quality of the hay you plan to put up, this might or might not be worth consideration. However, hay in a barn is considered to be “under the hat,” and it has been my experience that hay barns usually have a good value for both buyers and operators. I’ve talked to many farmers who said the hay barn they built was a game changer for their operations. Hay stored outside can lose 10-33% of value and feed-ability depending on climate and bale type. Now, if you are growing hay for a cow-calf operation, it might not make sense to build a hay barn for lower-quality hay. But if your hay is sold on the retail market, it might make sense. The barn will keep the quality at a higher grade, which will return higher prices and allow for flexibility for marketing (think about hay without cover as the equivalent of milk that is about to expire). A property with hay barns should be considered as a value bonus when comparing even though they are often undervalued by many.  

The different ways of putting up hay… 

We have this discussion with many buyers, especially those with experience in multi-family or commercial properties. “Show me the P&Ls.” Sure thing, boss, but are you going to operate this property in the exact same fashion with the same equipment and marketing? Duplexes with long-term tenants can only be run with so much variance: collect rent, deduct insurance, taxes, and maintenance expenses, and maybe you are paying for management. As you might have noticed throughout this article, there is a tremendous amount of variance in hay-growing acres. That being said, you can ask for financials, but I would focus on the following: yields per acre, inputs (fertilizer, lime, herbicides, seed, pump costs, etc.), the type, quality, and bale size of hay sold, the price of hay sold, and how it was sold (was the broker involved, was it in small loads, did you deliver, was it sold quickly due to storage space, etc.). With these numbers, you can calculate the possibilities of applying your own plan to the ground and make a financial projection. If you are really savvy, you might even project future improvements to the operation, the tax benefits (depreciation of equipment and improvements), and possible synergy with your other agricultural endeavors.  

I once heard a saying, “Every bale of hay has a home; it’s a matter of price and getting it there.”  If you think about it, investing in a crop that is so universally needed seems like a solid investment, in my opinion. Now, I can guarantee that the hay business isn’t easy. But is there anything that’s worth doing that’s easy? May your fields be tall and lush, and the hay stay out of your pants!