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Hay outlook hangs on weather, milk price

Published on April 25, 2013 3:01AM

Last changed on May 23, 2013 8:50AM

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Whether livestock and dairy producers will see relief from high hay prices is going to depend on the weather, but the current outlook suggests they won't soon get the break they're seeking.

Parts of seven western states have had limited rainfall, and alfalfa production as a whole is likely to be down, said hay expert Seth Hoyt, publisher of the Hoyt Report.

"I don't see the market dropping any further than it already has on new crop alfalfa hay in California and a few new crop contracts in other parts of the West," he said.

If they do decline further, it won't be very much, he said.

Some observers thought there'd be a significant drop because of the drop in corn prices, but there is less hay carryover from last year in some of the West, and new crop alfalfa hay production will be down in the West due to limited irrigation water, he said.

He estimated alfalfa production will be down 5 percent in California and all hay will be down 1 percent in the seven western states.

Higher quality new-crop alfalfa hay is going for $240 to $250 ton, f.o.b. stack, in California's Central Valley and $200 to $220 a ton on a few old-crop sales in Idaho and Utah, he said.

USDA Livestock and Grain Market News in Moses Lake, Wash., is reporting prices for premium hay at $180 to $210 a ton in Washington and $180 to $200 a ton in Idaho, but market activity has been slow. Everyone's waiting for new-crop hay, and that won't be until at least Memorial Day, said Greg Sanders, Market News reporter.

Two years of drought took its toll on hay stocks, leading to lower production and increased feeding. USDA put Dec. 1 hay stocks at 76.5 million tons, the lowest since 1957.

Hay stocks are not just limited, they're pretty well gone, and the water for the new hay crop is going to depend on the rest of the spring and summer, said Glenn Shewmaker, University of Idaho extension forage specialist.

Most of the big tracts in Idaho will probably be OK, but some of the smaller basins will likely run out of water earlier than normal, he said.

First cutting in the Magic Valley and to the east is going to be affected by frost, which is still hitting the region. It's the most important cutting, and yields will likely be down significantly, he said.

Idaho's hay acreage is about steady, and hay prices will likely hold steady, but that will depend on milk prices. Dairymen are near break-even, but that can go either way, he said.

Hay supplies in the Northwest are tight, but weakness in the dairy market and softening corn prices are pressuring alfalfa lower, Northwest Farm Credit Services reported on Monday.

"Until milk prices return to more profitable levels, hay price increases will be limited," the report noted.

The best individual to ask about price forecasts is Mother Nature -- that's the critical determinant, said Paul Patterson, University of Idaho extension ag economist.

Conditions in Idaho and adjacent states will affect market supply and demand. Last year saw a surprising amount of Montana hay rolling into or through Idaho, he said.

Predictions for water are tight, and precipitation will affect dryland yields and pasture. In addition, if summer temperatures mirror last year, hay growers in Magic Valley and western Idaho will need a lot of water later in the season, and it might not be available, he said.

One wild card is the continuation of a major drought in the Midwest and Texas, which could suck hay out of Idaho, especially dairy hay, he said.

Exports of hay from Washington, Oregon and California are also a factor, and Idaho hay could move into those states to supply domestic demand. The wild card is whether overseas demand will grow, and that's influenced by the strength or weakness of the U.S. dollar.

The weak yen in Japan will reduce hay exports to that country, but alfalfa hay exports to China and the United Arab Emirates should be strong again this year, Hoyt said.


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