Alfalfa prices are expected to stay strong for the rest of this year and possibly into next year because of reduced acreage and low inventories, according to alfalfa marketing expert Seth Hoyt.
California's wet spring may have eased the tight water supply for many farmers and ranchers in the state, but it also created some added stress and financial burden for two agricultural segments: dairies and alfalfa growers.

The combination of cool weather and rain resulted in delays of first cuttings of alfalfa in the Imperial Valley – hay that dairy farmers were counting on to offset the already tight inventory of carryover hay from 2010. Because of the delays, dairy producers were forced to pay higher prices for any alfalfa that they were fortunate enough to find. Those who couldn't find alfalfa had to shift to other roughage, such as almond hulls or wheat straw.

The hay supply was so tight that dairies in general have reduced the amount of alfalfa in the feed mix from 10-12 lbs per day to 4-7 lbs, an amount that Seth Hoyt, author of the weekly Hoyt Report, says may be a record low.

"Dairymen know that hay supplies are tight and the market is going to be strong. The other feeds are not cheap either, so what they will try to do is replace the alfalfa with some other kind of roughage, working with their nutritionists – roughage that would be lower in nutrients than alfalfa, but would be able to fill that void," Hoyt says.

Mich Etchebarne, an animal nutritionist in Modesto, says switching from one roughage source to another is more complex than one might think.

"Sourcing various forages in production dairy cows appears simple, when in fact it is probably one of the most important areas in dairy nutrition," he says. "Not only is it a challenge to find specific forages to match particular production needs such as growing, maintenance or milking, but even more so to purchase forages that are highly digestible and packed with nutrients available when fed in combination with various feed sources in a diet."

Etchebarne says forages account for more than 60% of feeds fed on a dairy and the combination of quality and cost has a significant impact on feed usage, operations cost and animal performance.

"We are constantly comparing various parameters for forage substitutions without compromising rumen function, cow health or milk production. Any forage fed on our dairy operations must meet three factors: quality, price and availability. In my practice forage is always present, yet no single forage type is essential because all our diets are put together based on nutrient requirements," he says. "Some of our highest-producing dairies have not fed alfalfa hay for over eight years simply because other high-quality forage sources have proven more cost-effective."

Alfalfa is now being cut throughout the state, although intermittent storms continue to wreak havoc in certain regions. The quality of many first cuttings was down from normal because of the weather.

"It seems like they go from one dynamic to another. Because of the rain, some growers held off cutting so hay got a little bit old or maybe some hay was down and it got rained on," Etchebarne says. "Now, this second cutting should be really nice hay. But because of the challenges of weeds and alfalfa weevils, the first cutting wasn't as good."

Hoyt, who is recognized as one of the leading experts on alfalfa marketing, sees inventories continuing to be tight for the rest of this year and likely continuing into 2012.

"This has created a very tough situation for some dairies. Because of the financial situation in the dairies in the past two years, a lot of them haven't carried much inventory of hay. They have been buying hand to mouth as they need it," he says. "Everything is really working against the dairy producer in the alfalfa market. There are tighter supplies of old-crop hay and it could be a record low because there is very little carryover. So that and the way this year has started out, this isn't what the dairymen needed."

Hoyt says alfalfa growers are also feeling the impact. Although prices are strong for the hay that is produced, growers will likely lose one cutting this season because of the cool, wet weather.

"Unless we have a really open October and November, they could lose a cutting. They could make that up at the end, but chances are they won't. So instead of getting six or seven cuttings, they might get five or six," he says.

Alfalfa shipments from other states set a record in 2010, but Hoyt doesn't expect that volume of shipments to continue because of reduced acreage planted to alfalfa throughout the Western U.S.
"The plantings are down in some of the states that ship to us, so it is hard to tell what will happen this year. I think there will be demand, but I'm not sure we will be able to top what we did in 2010 because of the acreage reductions," he says.

While alfalfa plantings over the winter were down, Hoyt says because of the strong hay prices there is a possibility that more alfalfa will be planted later this year for harvest in 2012. But other crop options such as cotton are also bringing strong prices back to the growers, so farmers have several choices as to what to plant.

"What happens to the hay industry in 2012 has a lot to do with what happens to the dairy industry in the next six months," he says. "Short-term, it is going to be a strong alfalfa market, even with dairies cutting back on usage. I don't know where the market would be if they weren't cutting back on usage. It will be a very strong market in 2011, and 2012 will continue to be strong, but perhaps a little softer than this year.

"There is a lot of hand-to-mouth buying and there could be even more of that in the months ahead. Historically, dairies will fill their barns to prepare for the next winter, but that whole cycle has changed and a lot more dairies are carrying very low inventories. They don't have the money to fill up their barns," he says.

California growers produced 8.2 million tons of alfalfa and other hays in 2010 and another million tons were shipped in from other states. Dairies consume about 75% of that hay, with horses consuming up to 20%. The rest goes to beef cattle, other livestock and the export market.