As 2011 winds down, there is the inevitable speculation as to how the alfalfa hay market will fare in the first quarter and/or the first half of the coming year. The consensus seems to be another good year for the hay market in 2012.
In November we asked a California Alfalfa and Forage Associationmember at a large ranch in the San Joaquin Valley to give his thoughts on what he expected in the coming months. He came up with the following five points that bode well for next year’s hay market:
1) Class III milk is currently trading around $16.50/cwt for May 2012. Historically, that’s relatively high, but it’s a break-even point for many dairies. That milk price can’t support a hay price much higher than $270 or $280/ton.
2) Corn and other substitute products are projected to stay high through the first part of next year.
3) There’s not a huge increase projected for alfalfa acres. I spoke with hay market analyst Seth Hoyt (TheHoytReport.com) earlier and he is expecting a 3-5% increase overall in California.
4) The number of dairy cattle is increasing slightly, but the key is that it’s not dropping significantly.
5) Hay rations have already been reduced, with most dairies feeding 5-8 lbs of hay per day per cow.
Based on the items above, he expects that the price of supreme hay will be $270 to $280 for the first cutting of next year.