Having to buy hay to feed cattle through winter has always been costly, but prices are skyrocketing this year as drought-caused shortages threaten to raise prices to record levels. Alfalfa hay, for instance, has recently risen over 60% to almost $190/ton, according to the U.S. National Agricultural Statistics Service.

With drought particularly bad in the Southwest, and exceptional drought having reached 75% of Texas, 52% of Oklahoma, and 48% of New Mexico, as of early August, many farmers are thinning herds and selling off cattle. One tactic to conserve the use of existing hay in feed-short areas is to utilize the right hay feeder, which can reduce hay loss by 30%.

The problem with a traditional hay ring is that cattle stand outside the feeder, tear the hay out, and let the excess fall from their mouths. When cattle bite off too much, as they are inclined to do, the waste falls to the ground, gets trampled – and won’t be eaten. A new type of hay-conserving bale feeder, however, is designed to keep cows from tearing out hay and wasting it.

“A hay-conserving bale feeder must be designed with a shape and size that requires cattle to extend their necks to reach the hay inside,” explains Bob Studebaker, owner of GoBob Pipe & Steel, a livestock equipment supplier that first introduced its original Hay Conserver hay-saving bale feeder about eight years ago. “With the hay bale inside, cows have to commit their heads inside and stay there while they eat. They won’t go in, get a bite, and back out. They stay in the feeder, so anything that drops out of their mouths stays in the feeder, which they eat later.”

While there are other hay bale feeders that claim to save hay on the market today, not all are created equal, he says. Some are too small or of the old “round” shape, which would be a tight squeeze for a large bale or allow the cattle get hay from the feeder without getting their heads inside.

Others use thinner gauge pipe, which may not be built to withstand years of animal use and harsh winter weather. Some of the newest feeders, like the Hay Conserver for example, are tested to hold over 15,000 lbs., have up to a 10-year warranty, and even guarantee up to 30% hay savings.

With steel prices stabilized and $500,000 deduction available to farmers and ranchers for qualified capital expenditures, now might be the time to invest in cattle-working equipment, Studebaker says. That includes fencing, corrals and other cattle-working equipment.

Current tax laws allow up to a $500,000 deduction for qualifying equipment such as livestock handling equipment, hay trailers, fencing and corral materials. The current level of $500,000, however, is scheduled to drop to $125,000 in 2012. Learn more specifics at www.section179.org.

“Selling off cattle will often generate taxable income because the cows are usually fully depreciated, and their calves have no tax basis at all,” says Ken Williams, CPA and managing director of Williams, Jarrett, Smith & Co., Tulsa, OK. “Farmers can minimize their taxes while maximizing economic gains through properly timed and structured expenditures.”

To the extent farmers have taxable income, they can make capital expenditures as long as they are qualified longer-term investments that can be expensed out up to $500,000 to offset taxable income, as provided by Section 179 of the IRS tax code, Williams says.

“Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment … purchased or financed during the tax year,” states Section 179.Org, a website designed to answer questions regarding the Section 179 tax deduction. “That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the full purchase price from your gross income. It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves.”

For more information, visit www.gobobpipe.com.