Heavy supplies of 2009 hay remaining on farms this spring could drag down prices growers get for their 2010 production, warns Matt Diersen, South Dakota State University ag economist.
Barring any serious weather problems, he expects production to be roughly the same as last year’s, despite the 1% acreage increase recently forecast by USDA. Economic recovery in the beef and dairy sectors should bolster demand, but that may be more than offset by high carryover.
“The increase in carryover stocks is going to do more to weigh on the market than any increase in production we’re going to see this year,” says Diersen.
Due to lower cattle numbers and slightly higher 2009 production, last fall’s Dec. 1 hay stocks were the highest in five years. Although hay usage probably was heavier than normal this winter, he expects the May 1 stocks figure to be up also. Last May 1, hay stocks were estimated at 22.1 million tons, 2% more than on the same date a year earlier. Diersen won’t be surprised if this year’s number, which will be in USDA’s May 11 Crop Production report, is significantly higher.
“It’ll be something to watch. I think anything under 24 million tons for May 1 stocks would drive prices up a little bit. But we’re not going to see anything like the sharp new-crop rally we saw a couple years ago.”
For all of 2010, he foresees “steady-to-higher” alfalfa prices compared to those of last year. But supplies will be tight, so any significant production deterrent, such as a drought or grasshopper invasion, “could put some pretty strong support under the alfalfa side of the equation again.”
In its March 31 Prospective Plantings report, the agency said growers expect to harvest 60.5 million acres of all types of hay this year, up from 59.8 million in 2009. Diersen thinks the increase will be largely grass rather than alfalfa because new alfalfa seedings were down last year. An earlier USDA report showed that 2.67 million acres of alfalfa were seeded in 2009 compared with 2.7 million in 2008.