With plentiful supplies on hand in many parts of the country, hay prices nationally could dip slightly in 2014, say two Extension economists.
May 1 hay stocks are at a high enough level to hold hay prices down nationally in the months ahead, predict Extension ag economists examining USDA’s latest Crop Production report. A few regions, however, could face a tightening in supply if poor weather hampers production.
U.S. hay stocks total 19.2 million tons, up 35% from the year-earlier level, but the third-lowest May 1 stocks level since 1989.
“Overall, the (stocks) numbers don’t tell much of a story other than we don’t have anywhere near the tremendously tight supply that we did a year ago on May 1,” says Matt Diersen, South Dakota State University ag economist.
Even with national numbers up, the report shows major differences between regions. Increases in stocks are most concentrated in five Midwestern states – Kansas, Missouri, Nebraska, North Dakota and South Dakota. That bodes well for cattle producers in that region looking to rebuild herds and for dairy farmers considering expansion in the wake of improved milk prices.
On the West and East Coasts, though, stocks are down sharply compared those of a year ago. Record lows were reported in California and Pennsylvania. “Supplies in those regions are likely to stay vulnerable to any kind of production problems that might come along during the course of the current growing season,” says Diersen.
Sluggish demand could take some pressure off supply in parts of the Mountain West, most notably in the Southwest, says Stephen Koontz, ag economist at Colorado State University.
“The stocks look tight, but the (beef) cow numbers in the region are so depleted. I just don’t see demand picking up very much in Arizona, New Mexico or Texas anytime soon. There are people wanting to do some expansions. But they want to do it with pasture, not hay, and it’s been so dry, the pasture just isn’t there.”
The report held a few state-level surprises, Diersen notes. South Dakota, for example, reported May 1 stocks of 1.5 million tons, up from Dec. 1, 2013, stocks of 850,000 tons.
“Given where we started (with supply) last fall and a relatively high price, I was expecting one million tons tops especially since we had so much cold weather that should have led to much more utilization,” he says. “One possible explanation is that livestock producers were substituting low-cost alternative feeds, like cornstalks, for hay in their rations.”
He doesn’t expect the same kind of scenario to play out nationally in the year ahead. The U.S. May 1 stock levels, combined with stable hay acres and lower corn prices, will likely result in hay prices backing off by 5-10%. In turn, the price drop should entice livestock producers to keep hay in their rations.
“It’s a good sign for demand,” Diersen says. “And while prices will likely drop, we’re not looking at any kind of huge decline.”
Colorado State’s Koontz agrees. “Prices aren’t likely to be as strong as they have been in recent years. But compared to other crops, the hay-making enterprise will continue to be a good, strong moneymaker this year.”