The narrow spread between high- and low-quality alfalfa hay prices in today’s supply-driven market could result in long-term challenges for hay growers selling to dairy customers, says John Johnson, owner of 3,500-cow Johnson Dairy in Eaton, CO.
“A lot of people are getting rewarded for putting up poor hay today,” Johnson told attendees at last week’s Mid-America Alfalfa Expo & Conference in Kearney, NE. “Right now, I can pay $285-300/ton and get the best hay that walks – hay in that 200- to 250-RFV range. Or I can pay $245-265 and get grinders hay. It doesn’t make any sense.”
An old dairy-industry standard, that the price of alfalfa should be three times that of corn silage, hardly compares to today’s market, Johnson says. “This year, we were paying $60/ton for our silage out of the pit. So the price of alfalfa hay should be $180/ton. What I’m telling you is that we’re paying way too much for hay. But that’s the market.”
He’s convinced that tight supplies will keep upside pressure on alfalfa prices for at least another two to three years. The danger for growers in this kind of high-price environment, he says, is becoming complacent about producing quality hay. “When this thing changes, and I guarantee you that it will, the price could drop back just that quickly. Don’t get caught up in just raising the junk or just making the tons. If you raise junk hay, you’re going to get paid for junk. On the other hand, there’s always a market for good hay.”
Johnson encouraged hay growers to learn more about how their dairy customers operate and look for non-traditional ways of doing business. “Everybody wants to sell a whole first cutting and have (the dairy producer) write a big check out on the spot,” he said. “But guys can’t do that today. This dairy deal is really, really tough.
“You’ve had some good years. What are you going to do with your money? Put it in a CD and get a quarter-percent interest? What would happen if you carry that hay year-round for your dairy customers? How about, every quarter, you look at adding a little upcharge of 3%? The hay is still sitting in your yard. You still have control of it. And your banker is happy.”
Growers looking to break into the dairy marketplace should contact dairy nutritionists along with individual dairy producers, Johnson suggested. “At the end of the day, the nutritionists will give you the biggest bang for your buck. They’re the ones who get the calls from dairy producers who have run out of hay and are wanting to know where they can get their hands on a supply.”
For more on the expo, sponsored by the Nebraska Alfalfa Marketing Association, visit “A Pictorial Slice Of The Mid-America Alfalfa Expo.”