Bullish On Hay

Ervin Gara III and Dennis Brown know they could make more money growing other crops this year, but they're increasing their alfalfa acres instead.

Gara, who owns Wyoming Haybusters, Torrington, WY, is adding 1,200 acres, bringing his total to 4,500. And Brown, Milton, ND, will add 100 acres to total 500. Both foresee continued strong hay demand and expect prices to be even higher than they were for the 2007 crop.

“I've got more customers than I have hay, and that's one reason we're increasing,” says Gara.

“For right now, anybody who has decent alfalfa is kind of in the driver's seat,” adds Brown.

While they're certainly not the only hay growers ramping up their acreage, Gara and Brown are bucking the national trend. In its March 31 Prospective Plantings report, USDA said growers expect to harvest 60.6 million acres of all types of hay, 2% fewer than in 2007.

Acreage is expected to drop throughout most of the Great Plains, Southwest and even the Southeast, where hay supplies are critically short due to last year's drought. Acreage increases, mostly minor, are projected for most states in the northern Great Plains, Western Mountain regions and Northeast.

USDA's total hay acreage estimate was a bit of a surprise to Matt Diersen, South Dakota State University ag economist.

“It's at the low end of what I would have thrown out as a potential acre number,” says Diersen. “Given the high hay prices, I wouldn't have expected much of a decline.”

He points out that the 60.6 million acres are the lowest harvest intentions since 1999, when hay stocks were high and prices low, the opposite of the current scenario.

In reviewing USDA's state-by-state numbers, he notes that the biggest expected acreage declines tend to be in Corn Belt states, where growers have the flexibility to shift hay acres to corn, soybeans or wheat. Most projected acreage gains are in strong dairy states with very high hay prices.

“So you've got a financial incentive to increase or maintain hay acres in those states,” he says. “That tells me supplies are tight, but the price has come up enough to encourage the production that might be warranted.”

Hay supplies are tight almost everywhere, but, overall, probably not quite as tight as they were a year ago. Stocks of hay stored on U.S. farms totaled 104 million tons last Dec. 1, 8% more than the year-earlier amount. Assuming wintertime usage was at roughly the same level as in recent winters, Diersen expects May 1 hay stocks to be slightly higher than they were last year, when stocks were the lowest since 1950.

If the national average yield comes in about normal, and livestock numbers don't change much, he figures hay production and consumption will match up well in 2008.

“If I had to guess, I'd say the year from a price standpoint will play out much like 2006,” he says. “Prices were very high. Not as high as in 2007, but very high.”

Much will depend on yield, however. “If you start painting a pretty bad drought scenario, that would be scary,” says Diersen.

Gara and Brown are expanding their hay production when neighbors are cutting back or getting out. Gara's No. 1 client, Dyecrest Dairy, Fort Collins, CO, bought 1,000 acres in southeastern Wyoming and hired him to grow hay on it. That accounts for most of his acreage increase, but he's also adding 200 acres of his own.

He says a lot of growers in his area plan to take two alfalfa cuttings, kill the crop with Roundup and plant wheat. He thought about doing some of that himself — wheat prices are high and the crop is easy and relatively inexpensive to grow. In particular, he's concerned about the large amount of high-priced fuel needed for hay production.

But he'll stick with alfalfa.

“I guess I'm a one-crop person,” says Gara. “I know how to grow hay, and I just rely on that.”

Brown, who rotates wheat and alfalfa, thought about going heavier on wheat this year and decided against it. Demand for dairy-quality hay has been strong, in part because his neighbors have switched to other crops. He says there used to be several growers with 8,000 total acres of alfalfa in his northeastern North Dakota county, and he's the only one left.

He could have sold all his hay by Jan. 1 this year, and is optimistic that demand for the 2008 crop will be even higher.

“The only thing that worries me right now is the price of milk,” says Brown. “Once milk starts heading south on us, these dairies can only afford to put so much in their rations, and they're obviously going to be looking for cheaper alternatives.”

Gara can be contacted at 307-532-1746; Brown, at 701-496-3565.