Dairy producers will have to pay top dollar for high-quality alfalfa hay during the coming year, predict two ag economists who've studied the economics of hay vs. other crops in their respective states.
Hay prices must be high in order for alfalfa to effectively compete with other crops for available acres, say Paul Patterson, University of Idaho, and Bruce Jones, University of Wisconsin.
Even at the current high price levels, neither sees much incentive for growers to seed alfalfa. In fact, both have heard that some existing alfalfa fields will be replaced by higher-value alternatives.
In Idaho, “there are several crops right now where the growers can gross over $1,000 an acre,” says Patterson. “We're in a situation now, with all these commodities battling for acreage, that I've never seen before.”
Wisconsin farmers have fewer options, but corn and soybeans remain tough to match.
“If alfalfa is going to stay, it has to yield a return that's competitive with corn or soybeans, which means the price of hay is going to have to go up to give the croppers incentive to keep that land in alfalfa,” says Jones.
In February, the price of dairy-quality alfalfa was approaching $180/ton in Wisconsin, he says.
“So it's moving, and that's being driven largely by the returns we can get from corn and other cash crops.”
Spring wheat, a low-input crop that can utilize spring moisture to make good yields, likely will gain acres this year.
“I'm hearing that people who would otherwise perhaps be raising hay are looking hard at wheat,” Jones reports. “Wheat is pretty attractive right now.”
Silage corn looks good, too, he says. It can produce more dry matter per acre than alfalfa without its harvest-time weather problems, and growers have the flexibility to harvest grain if it looks more profitable. He foresees 2008 corn silage prices in the $35-40/ton range out of the field, and Wisconsin growers can get 20 tons/acre.
Yields of irrigated silage corn can reach 32 tons/acre in Idaho, although 26 tons/acre is more typical, says Patterson. It's one of the crops that can gross $1,000/acre, with an expected gross margin in the $400-500/acre range. Malting barley looks like the gross margin leader, at over $700/acre, with spring wheat coming in about the same as silage corn.
Gross margins from established alfalfa may be competitive with those of spring wheat and corn silage, says Patterson. But it won't do that well in its first year.
“So if I'm a grower looking at the potential gross margin of alfalfa in the establishment year compared to the spring grain crops or even corn silage, the economics just aren't there to convince me to plant,” he says.
But it might not be wise to replace a good alfalfa stand with something else, given the cost of killing the alfalfa plus tillage and other expenses, he adds.
“People need to push the numbers on that,” Patterson says.
Both economists say the cost and availability of inputs such as fertilizer and seed will impact 2008 cropping decisions and profitability. Nitrogen and potassium fertilizer supplies are tight, according to Jones, and Patterson says certified small grain seed will be scarce.