Short hay supplies likely in many parts of the country will force buyers and sellers to market differently in 2013, says Dennis Stein, Michigan State University (MSU) Extension farm management specialist.
Buyers will want to find supply early, while sellers may be asked to guarantee deliveries.
Michigan’s supply situation, heading into the new-crop year, is similar to that in other Upper Midwestern and Northeastern dairy states, Stein notes. “We have no surplus whatsoever. Even if the weather cooperates and we have a fantastic crop this year, hay supplies are still likely to be short when we get into next fall and winter.”
In the past, many buyers bought hay as they needed it. “But … that’s not likely to be the case this year. You don’t want to get into December or January and find you don’t have the hay you need to get your herd through the rest of the winter.”
“We saw what could happen this past winter. People were driving hundreds of miles to get the last few bales of hay that were available, or they were buying three- or four-year-old hay because that was all they could find.”
Or connect with potential suppliers through local hay and livestock auctions. “Some of the sellers at those auctions might have other hay available that they’d prefer to sell outside of the auction.”
Depending on how much hay they’re going to need for the winter, buyers will want to contact lenders to arrange lines of operating credit as soon as possible. Some people are used to buying pickup loads of hay throughout the winter and paying cash for it as they go. Buying larger amounts at a time – maybe enough for the entire season – will stem cash flow.
“And the way the credit markets are these days, arranging a line of credit isn’t something you can do with a single phone call. It takes some time. You want to have that line of credit so you can take advantage of a good buying opportunity when you come across one.
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Hay sellers shouldn’t be surprised if customers ask them to sign hay-purchasing agreements this year. “Buyers will want some kind of guarantee that the hay they’re paying for ahead of time is going to be there when it’s time to take delivery,” says Stein.
Such agreements offer sellers advantages, as well. “You don’t want to hold 100 tons of hay in your barn for a buyer all fall and then find out next January or February that they don’t want it … because they were able to get a supply cheaper from somebody else.”
Sellers should ask for at least partial payment when making a sale agreement, he adds. They should also consider charging for storage when buyers can’t take full delivery of the hay they’re purchasing.
“It’s not a new concept in the grain industry. But for one reason or another, it hasn’t caught in the hay business. Sellers should be looking at storage as another service they’re creating for buyers and a way to generate some additional income by adding value. If you have to handle the hay more often, it should sell for more than hay that a buyer gets straight out of the field.”
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