A variety of factors will likely tug alfalfa hay prices in two directions in the Pacific Northwest (PNW) during the months ahead, according to a recent Hay Market Snapshot report from Northwest Farm Credit Services.
Supplies of high-quality alfalfa are extremely tight throughout the region due mostly to “less-than-ideal growing conditions” the last three years. “This should support first-cutting supreme and premium alfalfa prices in 2014,” notes the report.
A brightening outlook for the region’s dairy industry could also help bolster demand. Stronger milk prices, due in part to record dairy-product sales, along with stable-to-decreasing feed prices overall have improved the profit margins on many PNW dairy farms.
On the flip side, lower corn prices will likely temper demand for alfalfa as dairy producers look for opportunities to lower ration costs. Alfalfa has remained competitive with soybean meal, mostly because meal prices have stayed high relative to the decline in corn prices. But the report also notes futures prices for soybean meal have been under pressure as of late December. “Continued decline in soybean meal prices will be bearish for hay prices.”
The overall quality of alfalfa during this year’s first cutting may be the biggest wildcard for determining where prices will head in 2014, according to the report. “Assuming a quality first cutting, prices are likely to subside as more bearish factors are likely to take hold of the market. A poor-quality first cutting is likely to provide continued support to higher-quality hay (prices) later into the season.”
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