With Western dairy producers moving into a negative cash-flow situation, hay growers should expect a slight drop in hay prices.
Hay growers may have to soften their prices if they expect to hold onto Western dairy clients whose milk prices are dipping to $14/cwt over the next month. That’s according to Seth Hoyt, a hay market analyst who spoke at last week’s Forage Seminars hosted by Hay & Forage Grower and Mycogen Seeds.
He lowered his price predictions for premium-supreme, first-cutting hay by $10-20/ton from what he’d reported in December.
“Dairies are still the main driver of our alfalfa hay markets,” he told the standing-room-only crowd at World Ag Expo, Tulare, CA. “Instead of paying $320-330 delivered to Tulare for top alfalfa hay, dairies want to be down around $290-300/ton.”
He’s already heard of contracts supporting those prices. In western Nevada, 4,500 tons of 55-TDN or 175-RFV and higher hay sold for a delivered price of $295/ton into Tulare. Another contract, in east-central California, included 7,000 tons of first- and second-cutting dairy-quality hay at $297/ton delivered to Tulare.
Hoyt’s new predictions put Imperial Valley first-cut, supreme hay at $250-255/ton; central California at $260-270; Idaho, $210-220; Utah and Nevada, $220-230; and Washington, $240-250.
Milk prices in California in February are estimated to be around $14.75/cwt, compared to $16.75/cwt in February 2011 and $19.50 last summer. “If you look at March, the estimate is for $14.25 or lower, and last year it was $17.35. It comes at a bad time, because cost of production at the dairies is also up from last year.”
It takes about $16/cwt to produce milk in California. Dairies that don’t grow their own forage may be dealing with up to $17/cwt or higher in production costs.
“They’re going into a negative cash-flow situation. So I can’t see that the hay market is going to continue to be as strong when you have dairies … losing money.”
Durum wheat in the Imperial Valley of California will displace alfalfa hay acres again this year, said Hoyt. He estimated a hay acreage increase of only 3-5% in California, Idaho, Nevada, Utah and Arizona and unchanged to 3% higher in Washington. “Historically, if you had a market like we’ve had in 2011, you’d see a lot more than a 3-5% increase in acres. You’d see acres jump 15% or 20%.”