Look for hay prices in most of the country to stay locked in a relatively narrow trading range through the rest of the current marketing year.

“There’s not much room for (hay prices) to go too much higher or too much lower,” says Matt Diersen, ag economist at South Dakota State University. There could be exceptions, particularly in the far West where producers are struggling with drought.

USDA’s January report on hay stocks, as of last Dec. 1, plays a major part in Diersen’s forecast. It shows total stocks on U.S. farms at 89.3 million tons. While that’s up by 17% from 2012 levels, the numbers need to be taken in context, he says. “It’s up from rock bottom, but it’s still pretty low.”

Given the supply situation, livestock producers should buy on any sign of a further price drop, says Diersen. “If prices fall at all from where they’re at now I’d be looking to buy, especially if I was uncomfortable about having enough forage on hand to get me through the winter and into the new crop.”

Diersen’s logic: A price drop of just 5% from current levels in most regions would likely trigger a major increase in domestic hay use. In turn, that would tighten up ending stocks, sending prices higher before the new crop arrives.

Additional harsh winter weather like that experienced by much of the country the first part of 2014 would also lead to more hay feeding and dwindling supplies.

Among regions, the western U.S., and especially California, may be most vulnerable to supply-side pressure over the next few months. An extended drought in California already has producers there scrambling to find scarce supplies (see “Water Woes Hamper California Hay, Beef Sectors”).

Continued strength in U.S. hay exports will also likely put further pressure on domestic hay stocks and prices in the region. “If I’m a hay buyer, the closer I am to California, the more nervous or skittish I’m likely to be about the supply situation,” says Diersen.

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USDA also estimated U.S. production for all hay last year at 136 million tons, up 13% from the 2012 total, according to its 2013 Crop Production Summary issued in January. For alfalfa, USDA estimated total production in 2013 at 57.6 million tons, up 11% from the previous year’s total. Keep in mind, says Diersen, that percentage increases reported for last year are relative to the extremely low production from 2012. ”There was an improvement, but not a substantial improvement.”

The summary showed that, with the exception of Wisconsin, haylage production was up in many of the traditional dairy states in the Upper Midwest and Northeast. “They’re sitting in pretty good shape in terms of forage supplies,” says Diersen.

New seedings of alfalfa and alfalfa mixtures in 2013 were up by 5% from year-earlier levels, according to the summary. That marks the second straight year of increases in seeding acreage.

Most noteworthy, says Diersen, is that new seedings were up in Iowa, Minnesota, Nebraska and Wisconsin. “Some of the increase might have been due to re-seeding (due to winterkill),” he says. “But nationwide, we had 2.5 million new acres planted. That tells me we could be coming off the bottom for really low, harvested (alfalfa) acres. Any way you look at it, that’s a good thing.  Without additional acres, we’re going to have continued swings in supplies and prices and more volatility in the market. This at least is a move in the right direction.”

The next glimpse of where U.S. hay production might be headed in 2014 will come in late March when USDA issues its annual planting intentions report. That will be followed up in mid-May with its ending hay stocks report.

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