An improved dairy outlook and tighter-than-expected hay supplies have raised Seth Hoyt’s price projections for 2011-crop hay in the Western U.S.

The author of The Hoyt Report, a weekly forage marketing newsletter, now predicts that first-cutting, supreme-quality alfalfa hay will bring $180-200/ton FOB in Washington State, $30/ton higher than he was predicting last fall. He expects new-crop prices to start at $200/ton in California’s Imperial Valley and $220-230 in central California.

“With the carryover being so short, and hay production going to be down in 2011, and with the outlook for better milk prices, this hay price will be higher than I thought,” says Hoyt, who spoke at the Washington State Hay Growers Association Conference in January and at World Ag Expo in Tulare, CA, last month.

In early January, USDA released its estimate of Dec. 1, 2010, hay stocks, showing that the amount of available hay going into winter was below year-earlier numbers in most Western states.

“With less hay being carried over into 2011, especially in states like California and Idaho, which have big dairy cow numbers, that’s a big deal,” says Hoyt. “The hay supplies are so short in California right now that they’re looking for hay anywhere they can find it. That is going to be a big factor as far as this market is in 2011.”

The drop in carryover was attributed to lower 2010 hay production, and he expects that trend to continue this year. Hay exports look strong, with gains expected in shipments to China, Japan and the United Arab Emirates. But acreage of hay grown for the dairy industry will be down because prices of several other crops are high and the money is more secure.

“Growers have been reluctant to grow feed for the dairy industry when they’re not sure about getting paid,” according to Hoyt.

Pointing out that milk prices ranged from $14 to $16/cwt in California in 2010, he says the dairy industry needs “to come up with some way to stop these highs and lows.”

High prices for dairy ration ingredients, especially corn, will increase milk production costs in 2011. On the other hand, the butter, milk powder and cheese markets have improved, and dairy product exports are ahead of 2008’s record pace.

Milk prices look to be at profitable levels through the first half of the year, reaching $18-18.50/cwt by March. That’s almost $2/cwt higher than Hoyt had predicted earlier.

“But can it be sustained?” he asks. “We need a sustained period of profitability to get dairy producers back to where they can pay their bills on time -– to where the money is where it needs to be in order to make you, the grower, comfortable about growing hay for them.”