Factors Affecting Hay Prices at Auction: A Hedonic Analysis

Abstract

Core Ideas Marketing hay in small square bales was found to add significant economic value to the forage. TDN and RFV were both significant drivers of economic hay value. Quality measures had more price impact on small square bales than large round bales. An inverse relationship was found between square bale weight and sale price per metric ton. Despite hay’s significance as a driver of the agricultural economy and its role as a major input into the livestock sector, it has generally received less attention in marketing literature than many other commodities. This work examined sale results from a hay auction in Central Kentucky where information on hay weights and quality were made available to prospective buyers prior to sale. Utilizing this data, a hedonic analysis was employed to examine specific factors that impacted sale prices for individual lots of hay. This work built on existing literature by evaluating the price impact of large round bales compared to small square bales, hay quality measures of Total Digestible Nutrients (TDN) and Relative Feed Value (RFV), lot size, and bale weight. Hay sold in small square bales was found to net a significantly higher price than hay sold as large round bales, even when holding other factors constant. This work also confirmed the importance of hay quality measures as a price driver, even in a market environment without significant dairy influence. Finally, quantitative evidence was found to support a negative relationship between price and small square bale weight, such that price and revenue would likely decrease as small square bales become larger. This work has implications for producers and sellers of hay as they consider marketing strategies and hay buyers as they attempt to understand what drives prices of hay in their region.