Having experimented with hay storage for about ten years now, I can definitely tell you what doesn't work, lol.
John, are you growing and storing your own hay? Or purchasing it already baled? The concern for fires is with still green uncured, partially cured, or wet hay. If that's the case, then a separate shed would be your safest bet (only second to properly drying it before storing). Depending on your climate conditions, I would recommend not placing the bales or stacks directly on the ground. I've found that even when it seems dry, the bottoms of those bales or stacks that are in contact with the ground are the first to decompose. I've lost a lot of hay that way. Pallets work well because they get it off the ground and allow some air circulation under the hay.
That being said, when we built my dream barn we included a hayloft over the goats, with a hay chute to drop hay directly into the hay feeder. Although there are some challenges getting the hay into the loft, it's wonderful to not have to wade through a pack of grabby goats with the hay in hand. We both buy hay and grow it. I just make sure the homegrown hay is completely cured.
That was for my convenience, I admit, but I agree that one can never have too much storage space.
I both purchase and grow my own hay. Yes, I normally have an assortment of at least 25 spare pallets at any point in time. I agree, there are dangers in leaving the hay on the ground and already use pallets for that. Besides, pallets are great for throwing together a quick shelter or making a gate. They also help to reinforce fencing that the pigs have taken an interest in. I already have a place in my barn that will hold a couple dozen or more bales. While I dont have a large amount of livestock, the numbers have expanded. I expect further growth. I imagine I will need about 100 bales of hay and straw by this winter and more by next. So my plan is to install a shelter for the hay and straw and reduce the bales in the barn to a dozen near the stalls . I want to keep a few in the barn so I dont have to carry the bales on ice or in a rain storm.
"Good decisions come from experience. Experience comes from bad decisions." ... Mark Twain
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