Western hay growers will likely earn $30-50/ton less profit from their crops in 2012, predicted Seth Hoyt, headline speaker at the Dec. 11-13 Western Alfalfa & Forage Conference in Las Vegas, NV.

That depends, of course, on the amount of hay grown and milk prices, added Hoyt, who reports on the Western hay market in his weekly newsletter, The Hoyt Report.

“I think the pipeline is going to be so low on early supreme-quality alfalfa hay, though, that the price of alfalfa on first cutting will be strong. Then I think it is going to taper off,” Hoyt told 800-plus conference attendees.

“In the Imperial Valley, I’m estimating $260-270/ton starting off on the first cutting; central California, starting around $270-280/ton; Washington, around $250-260; Nevada, Idaho and Utah, somewhere in that $230-240 range. Maybe western Nevada will be as high as $250.”

In 2011, growers were rewarded with some of the highest alfalfa hay prices on record – some touching $350/ton delivered in central California. Supreme-quality hay averaged $110/ton higher and fair-quality hay, $100/ton higher, compared to 2010 totals. Yet lower yields and fewer acres planted to hay have reduced hay stocks, Hoyt said.

“Our Dec. 1, 2011, hay stocks are going to be down roughly around 5-7%. They were actually down 14% on Dec. 1, 2010 (in seven Western states).”

Washington will make the biggest turnaround in hay stocks; compared to a 13% increase in 2010, stocks will be down 15-20% in 2011, he said.

“I am going to put December hay stocks in California at 1.97 million tons, which is up about 6% from what we had a year ago. But the other states will be down. A tremendous amount of alfalfa hay from Montana moved into Idaho, Washington and down into Texas. We saw a lot of hay from Wyoming, Arizona, even some from Idaho and Utah, going to Texas and New Mexico because of drought.”

Western hay showed strong movement toward drought areas from late summer on. But by late November and early December, that movement slowed, Hoyt pointed out. “If they get the rains in Texas and that drought is broken, then there will be less hay shipped into that market in 2012.”

High hay prices also forced dairies, particularly California dairies, to feed less alfalfa. “For 2011, we’ll be down to about 9.5 lbs of alfalfa hay fed to milk cows vs. 11.25 lbs in 2010. That’s about a 15-16% drop,” said Hoyt quoting California Department of Food and Agriculture Dairy Marketing Branch figures.

“So if they’re not feeding as much alfalfa, what are they feeding? Corn silage,” he said. Most of the corn silage in central California this year cost $50/ton standing in the field. In Idaho, corn silage sold for between $32 and $35/ton in the field.

“Last Friday (Dec. 9), a small amount of supreme alfalfa hay delivered to Tulare dairies was bringing $320-330/ton; corn was at $270 delivered. That’s a $50-60 difference between supreme alfalfa hay and corn going into Tulare. That might be the first time that happened with that kind of spread.”

Western milk prices are generally at breakeven. In California – and the same trend applies to other Western states – the June-through-August high of about $19.50/cwt has slipped to a December over-base milk price estimate of $16.50/cwt, the market analyst added.

“At the same time, milk production costs are going up, and we’ve seen in the second quarter they were $16.79/cwt. One thing that will help temper the increase in milk production costs is the drop in grain prices.”

Milk production in the West was up 3% this past October compared to a U.S. production increase of 2%.

Cow numbers in California in that same month were up about 27,000 vs. cow numbers in October 2010. “If you look at the Western states, the October milk-cow number was up 2%, which is higher than the national percentage increase. And ... there are plenty of milk replacement heifers available to put back into these herds right now.”

Export customers weren’t happy with Western hay prices. Prices were so strong in the Imperial Valley and central California that exporters shipped more alfalfa hay out of the Pacific Northwest the first eight months of 2011. All-baled-hay exports from Washington and Oregon ports in 2011 were up 14% compared to that exported the year before. California all-baled-hay exports were reported to be down 8%.

The United Arab Emirates (UAE) government establishes what it will pay for alfalfa hay. Export companies shipping hay to the UAE waited for summer Western hay prices to drop. But buyers were forced to aggressively buy in mid-to-late summer because they had not yet bought enough hay to fill the government order. Exports to the UAE increased in September and October but probably were lower in November and December due to higher alfalfa hay prices.

“The price the government has established is still not working for exporters shipping into that market.”

The hay export market to the Chinese is growing, but “we’re going to have to have a price that will work for them. They were not happy with the price this year.”

Exports to Japan were down 2% because of the 2011 tsunami, but are on the increase, Hoyt said.