Alfalfa growers targeting the dairy market may want to put a bit more emphasis on tonnage and a bit less on quality this year, says Matt Diersen.
“I'd sacrifice a little quality just because you're probably not going to get paid for it,” says Diersen, a South Dakota State University ag economist.
He expects alfalfa hay supplies to stay tight and prices strong throughout 2009. But he doubts that prices for top-end hay will approach their 2008 peaks, primarily because of the outlook for continued lower milk prices. Dairies will still buy plenty of high-quality alfalfa, but may not be willing to pay premiums for super-high quality.
“They'll take the tonnage without having to pay a premium for quality, or as high a premium,” Diersen predicts.
Lower fuel prices and even distribution of available hay are keeping the edge off hay prices this winter, he adds. In its Jan. 12 Crop Production report, USDA estimated Dec. 1 hay stocks at 103.6 million tons, slightly below the Dec. 1, 2007, figure. But, while last winter's stocks were concentrated in Texas and Oklahoma, this year they're “much more nicely distributed throughout the country,” he says.
“That takes the extreme price pressures off of any given location, and prices are down consistent with that,” says Diersen.
Dec. 1 hay stocks were higher than year-earlier levels in much of the country's southern half, but lower from Nebraska north and west. The lower stocks in that region may be due in part to higher 2008 hay exports. Through October, 400,000 tons more hay were sent overseas, primarily from California, Washington and Oregon, than during that period in 2007, says Diersen.
He doubts that exports will be as strong in 2009 because the dollar has strengthened against foreign currencies, especially the Japanese yen.
“We're coming off a year with a very weak dollar that favored ag exports, and that was probably a little bit of an anomaly,” says Diersen.
The January report included USDA's final estimate of 2008 hay production. It put production of alfalfa and alfalfa mixtures at 69.6 million tons, 3 million tons lower than in 2007. Growers harvested nearly 700,000 fewer acres, and the average yield was about the same, at 3.32 tons/acre.
Don't expect production to increase much this year, Diersen advises. He says an earlier USDA report estimated new alfalfa seedings at 2.7 million acres, fewer than were seeded each of the previous two years.
“This clearly points to no huge increase in alfalfa acres,” he says. “We had above-average yields that really kind of bailed out the whole country, and we can't count on that happening again. So I think alfalfa supplies are going to be tight.”
The supply situation for other types of hay looks better. He thinks the Dec. 1 hay stocks figure was weighted heavily toward grass hay, and end-of-year pasture conditions looked good.
“From the beef side of things, there'll be pockets, but it doesn't look like there will be anywhere near the price pressure that we've seen the last couple of years,” says Diersen.