Hay growers holding onto 2008 production expecting wintertime price increases may not see that happen this year.

Industry experts foresee prices for high-quality alfalfa hay strengthening in a few areas, but holding steady or even declining in most. Supply-and-demand fundamentals, along with lower milk prices, are primary factors in the bearish overall outlook.

“It's going to be a strange year for hay prices,” says Jack Getz, USDA Market News reporter based in Moses Lake, WA.

USDA recently reported that supreme alfalfa was averaging $210-220/ton in California. But Getz doubts that current prices are sustainable there or in the other states where he gathers price information.

“Hay prices will be lower in the Northwest, California, Idaho and Nevada from now until spring,” he predicts. “Exporters have all the hay they need. Dairy inventories are long and ample. Bankers are not extending lines of credit to dairies to buy new hay. The bankers are telling dairies to use current inventory, and then they will get their lines of credit in the spring.

“So hay prices will rebound some with the spring crop but not to previous levels,” he adds. “In addition, hay also has to compete with corn and other commodities that have come down in price.”

Different fundamentals govern the hay market in New Mexico, where the prognosis is somewhat better. Supreme and premium alfalfa are selling in the $200-250/ton range there, and USDA reports that most of the hay is grown under contract, so prices should remain steady but trend lower.

Prices will stay relatively steady until spring in Kansas and the Oklahoma and Texas panhandles, believes Steve Hessman, USDA Market News reporter in Dodge City, KS.

“The hay supply is tight, but milk prices have fallen,” he says. “At the current milk prices, dairies are balking at paying current prices ($185-210/ton) for supreme alfalfa. Most believe hay prices will fall if they wait.”

Lower fuel prices are helping maintain current prices, though, by enabling growers to transport hay to southwestern Kansas, Hessman adds. Grinders in that area supply cattle feedlots there and in the two nearby panhandles.

“If the weather remains mild, prices will soften; a bad winter will keep prices steady,” he says.

Glen Schickedanz, USDA Market News reporter in Oklahoma City, reports that the alfalfa hay supply is limited because past flooding destroyed acres that have not been returned to production. Premium alfalfa is selling in the $165-185/ton range.

“Prices for alfalfa hay should remain steady to strong,” says Schickedanz. “Grass hay is abundant with the exception of the panhandle. Prices should hold steady ($60-80/ton) but trend weak because of a lack of movement.”

The Upper Midwest could see alfalfa hay prices increase, according to Ken Barnett of University of Wisconsin Cooperative Extension.

“Hay prices could increase 10-20% based on production and winter weather,” says Barnett. “We had a higher yield in the Midwest in 2008, but we also had a hard winter in 2007-2008 with snow ground cover that forced producers to feed more hay to their cattle. Overall U.S. hay production fell about 2% in 2008 below 2007 production. That will limit supply.

“If we have a mild winter this year, a 10% increase seems more likely,” he adds. “If we have a hard winter, then I would expect a 20% increase.”

Tom Keene, University of Kentucky hay marketing specialist, expects steady to higher prices in that state from now until spring.

“Kentucky cattle producers make most of their own hay,” Keene points out. “The drought of 2007 and the shortage of hay that ensued caused cattle producers to make as much hay as they could in 2008. And although 2008 was a drought year, the drought did not occur until most cow producers had made enough hay to get them through until spring.

“So cow hay prices should remain steady. Most dairy operators and horse owners usually don't grow much of their own hay. These groups usually import their hay from around the country, and with quality hay inventories being in short supply, they will pay more for it.”

The economic slowdown has affected the hay market in the Southeast, according to a report by Randy Alford, USDA Market News reporter in Montgomery, AL. Buyers have less money to spend and are choosing to buy lower-quality hay. An ample supply of that hay has depressed the overall market. Demand and movement are light - even to the horse industry - but prices have remained steady.

That situation won't last, believes Don Ball, Auburn University forage agronomist.

“This has been a good production year in the Southeast,” says Ball. “There is no shortage of hay. Beef producers are not in an expansion mode so prices should trend lower from now until spring.”

Chris Teutsch, Virginia Tech extension forage specialist, doubts that prices will change much in his region.

“The cow-hay supply is good and prices are holding steady,” says Teutsch. “Horse hay supply is a little tighter and we could see prices climb toward the end of the winter. Since Virginia is in a horse-hay-deficit area, lower fuel prices are helping.”