With hay acreage remaining low, prices are likely to remain strong, especially for high-quality hay.
The conventional wisdom ahead of last week’s Prospective Plantings report from USDA was that U.S. hay acreage would likely rebound in 2014. The reasons looked to include historically strong hay prices, falling corn prices and improved prospects in the beef and dairy production sectors.
Instead, USDA estimated that U.S. hay growers would harvest hay on 58.3 million acres. While that’s up from a low point of around 56 million acres in 2011 and 2012, it’s still well below the 60-plus million acres that have been normal over the last decade.
“I was surprised to see the numbers as flat as they are,” says Matthew Diersen, ag economist with South Dakota State University Extension. “Most of the indications beforehand were that we’d see at least a little uptick.”
The low acreage numbers all but guarantee there will be more pressure on prices for the foreseeable future, he says. “With so few acres, it won’t take much of any kind of yield stress in 2014 to really tighten up supplies. There’s very little chance that even a bumper crop would give us any kind of huge carryover.”
The USDA forecast also astonished Steve Koontz. “Given how profitable it is right now, I would have expected to see more acres going into hay,” says Koontz, ag economist with Colorado State University. “Instead, it looks like many growers are planning to take the ground out of corn and plant soybeans.”
With reasonably good growing-season weather, he adds, stocks could rebuild some. “But that will be because of good yields, not more acres.”
Hay prices may stabilize a bit, too. “But even then, the price won’t come off a lot, especially for the good-quality hay. Demand for that kind of hay should stay strong with good returns expected on the livestock (beef and dairy) side. The way this year is shaping up, the hay enterprise on a diversified crop operation is likely to make you a lot more money than anything else you might plant.”