Hay growers looking to fine-tune pricing strategies before the winter feeding season may want to consider two ag economists’ interpretations of recent corn and soybean production estimates and how they affect hay prices.
This year’s national corn crop has been forecast at 14 billion bushels, a new U.S. record, according to USDA’s November Crop Production report. Soybean production is forecast at 3.26 billion bushels, the third-largest crop on record.
“There is going to be cheaper feed competing with alfalfa in rations and that’s likely to weigh to some extent on hay prices,” says Matt Diersen, ag economist with South Dakota State University Extension. “But it’s not likely to be anything all that dramatic.”
The following other factors, suggest Diersen and Steve Koontz, ag economist at Colorado State University Extension, could also affect how growers and sellers market their product.
Tight supplies of high-quality alfalfa hay, nationwide, will likely widen the price spread between high- and low-quality hay this winter. Wet weather early in the season delayed harvest and crimped quality for many hay producers in the Midwest and East. Western hay growers faced similar problems during their last one or two cuttings of the year. A variety of market reports indicate that many growers are trying to unload their lower-quality hay now before prices move even lower, Koontz says.
“Those with higher-quality hay may be keeping it in the shed in anticipation of prices going higher.”
Corn prices may decline slowly, so don’t be in a hurry to sell your hay. Many Midwestern grain producers used profits from record and near-record prices the last three years to build on-farm storage facilities, the Colorado economist notes.
“Many (grain) growers might simply decide to wait things out until demand comes back and prices improve before marketing their crop.”
The message for hay sellers: There’s no reason to panic sell at this point.
As ethanol plants ramp up production to capitalize on lower corn prices, you may not want to hang on to higher-quality hay. More of ethanol’s byproduct, distillers grains, will also be produced and can be used as an alfalfa substitute by livestock producers looking to trim ration costs. Diersen estimates that it will take six to nine months for ethanol production to be back at full force with an adequate supply of distillers grains.
“If you have high-quality hay to sell, you might want to move it sooner rather than later in this marketing year,” he says.
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Prices for soybean meal are currently high. But if they come down, alfalfa demand and prices will suffer. There’s currently plenty of demand for soybean meal and oil, so soybean crushers are still paying top dollar for raw product. But the futures market hints that a falloff in soybean prices is likely next spring. “As long as the soybean meal price stays high, we won’t see a decrease in demand for other high-protein feedstuffs like alfalfa,” says Diersen.
Beef and dairy herds are expanding, which should increase the demand for hay. Alfalfa and other hay demand should stay steady or increase slightly for at least the next six to nine months, Diersen says. “That’s supportive of prices.”
Row-crop acre shifts could pencil out well for alfalfa. As corn profitability drops, some growers will likely put more acres into soybeans in 2014. Among other things, that means there would be less corn going into corn silage. “That would bode well for returns on alfalfa,” Diersen says.
Ag commodities continue to be volatile, so think about taking a “measured approach” to marketing hay. With so many unknowns, that may be the best strategy for alfalfa growers looking to sell high-quality product.
“You could sell some of what you have now, while prices are still pretty strong. Then sell the remainder in January, once you see what the supply situation is,” says Koontz. “Prices could drop off a little between now and then. But given how tight the supply is, it’s not likely you’ll lose all that much by waiting. I’d definitely try to have everything unloaded by March.”
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