Despite recent rains, drought effects are keeping hay prices high in California. As a result, growers and livestock producers remain nervous about available and future forage supplies. Overall, hay prices will be higher across the West the first part of 2014, said market analyst Seth Hoyt at World Ag Expo.
Last week’s prices for Imperial Valley premium-supreme alfalfa hay – that buyers aren’t taking the time to quality-test so others can’t buy it out from under them – were at $250-260/ton fob.
That’s a turn-around from Hoyt’s mid-December prediction – made before drought took hold – of lower hay prices following the drop in corn grain prices.
“I gave a talk in Reno on Dec. 12 and estimated the Imperial Valley market between $215-230/ton. But I made the comment: ‘If we don’t get rain, all bets are off.’ Well, all bets are off,“ he told a standing-room-only crowd at the Feb. 11 Forage Seminars hosted by Hay & Forage Grower and Mycogen Seeds.
Hay dealers are telling some California Central Valley dairy producers that the Imperial Valley alfalfa hay they are buying for them won’t be tested before it’s bought. Dealers are eyeballing quality so producers don’t lose the hay by taking the time to test it, said Hoyt, author of a marketing newsletter called The Hoyt Report. First-cutting supreme alfalfa in central California could reach $270-280/ton fob or higher, he forecasted.
“We’re in an environment in which we don’t know how much production we’ll get. If we don't get more water and growers can’t get their summer alfalfa hay cuttings, then there is a concern as to how much feed we’re going to have for dairy cows.”
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In Utah and Idaho, supreme alfalfa hay first cuttings could bring between $215 and $230/ton, Hoyt suggested. “Some growers in southern Utah have been bid (contracts for) $220-230 for the season and have turned them down. They are thinking the market is going to be like in 2011, where it got to $240-250. Will it get that high? I don’t know.”
Hay trucked into California from other Western states may incur higher freight costs because of a new California truck emissions law, Hoyt warned. “If that hay is delivered into Turlock and Tulare for $310-320/ton, you can back out the freight and you are looking at around $230-240/ton fob for supreme alfalfa hay in central and northern Nevada. Obviously, the fob price will vary depending on delivered prices to California.”
In Washington, he said, “dairies will be aggressive on first-cutting because they’re going to need quality alfalfa hay. It will be interesting to see where the Imperial Valley and central California premium export alfalfa hay markets are when first cutting comes off in Washington. There is a chance that, if the Washington alfalfa hay price is about $25/ton below Imperial Valley and central California prices, Washington exporters could be competitive by paying less for hay – to make up for lower ocean freight rates from California.
“They can’t compete with California on ocean freight.”
In one scenario, Hoyt suggested a premium export alfalfa hay price range of $205-215/ton for Washington growers. But this could vary depending on the California market.
In central Arizona, growers have already contracted the first two cuttings of alfalfa hay for $225/ton fob with a “short-haul” to dairies. “I think we’ll see the market in central Arizona a little lower than in the Imperial Valley and Blythe. In the Poston-Parker area, you could see top alfalfa hay bringing in the $230- to $250-fob range, possibly $240-250 early from California buyers until there is “more hay in the pipeline.”
Alfalfa hay acres look to be down in California overall, but up by 10,000 acres between the Imperial Valley and Blythe areas, he said. Alfalfa acres could increase in Arizona, stay the same or increase slightly in Idaho, be unchanged in Utah and Nevada and stay the same or decrease in Washington.
Corn silage acres aren’t likely to take up the slack, Hoyt said. From 2012 to 2013, corn silage acres decreased in California by 10,000 acres. “We’ve lost 50,000 acres of corn silage in the last two years mainly because of the strong corn-for-grain market.” This year, the low water supplies will keep corn silage acres down, he added.
“It’s the same situation in Idaho. They were down 5,000 acres last year, and they’ve fighting drought as well, although they did receive good rains and snow last week.”