Prices for first-cutting, supreme-quality alfalfa hay should range about $200-220/ton (f.o.b. stack) in many areas of the West, $220-230/ton in California’s Imperial Valley and $240-250/ton in central California, estimated Seth Hoyt.
They aren’t likely to come near last year’s prices until dairies make some money, added the market analyst and author of The Hoyt Report. Hoyt spoke at the Feb. 12 World Ag Expo Forage Seminars sponsored by Hay & Forage Grower and Mycogen Seeds in Tulare, CA.
“I don’t see a supply problem with hay in the West. What I see is a demand problem with the dairies. And the milk price will be the key,” said the market analyst.
“We kept hearing, the last eight months, dairy economists talking about milk prices being better in early 2013. If you’re in central California, you start to get the mentality of someone from Missouri: Show me. Show me it’s going to get better. It hasn’t gotten better. We still have too much milk in the U.S.”
Growers in central Nevada’s Diamond Valley, where alfalfa prices were as high as $245/ton (f.o.b. stack) last year, can also expect lower prices. “Now, if this milk price in the next three to four months gets stronger and we have $19-20/cwt milk or higher in central California, then all bets are off because we are not going to have an oversupply of hay.”
Hay stocks are the lowest since the 1950s across the U.S. and, in the West, down 15%, said Hoyt in quoting USDA-National Agricultural Statistics Service Dec. 1 numbers. California’s 16% increase is the largest in any Western state, and the state is one of the few in that region showing an increase from 2011 to 2012.
Alfalfa acres in the West are likely to be lower overall in 2013. “Because of the lower cotton market, you will probably see a few more (alfalfa) acres in Arizona. I’m estimating that the alfalfa acres in California are going to be down something like 3-5%. But you’re going to see more Roundup Ready alfalfa in the mix; in California you’re probably going to see 50% and maybe as high as 60%,” he said.
Last fall’s strong hard red wheat market will displace some Western alfalfa-hay acres.
Another factor affecting hay supply will be irrigation water supplies, he said. “Here in the Central Valley, we had great November-December rains. But we haven’t had a rain going on six weeks, and it’s turned dry in other areas of the West. Last fall it looked like surface water supplies from the Bureau of Reclamation for central California would be 40% at least. The latest estimation is 20%.”
The corn-grain market has softened as well, with rolled corn delivered to Tulare-Hanford dairies at $313/ton in mid-February. “All indications point that we will see bigger plantings in the Midwest.” If corn prices continue to soften, this should keep Western hay prices in check.
The market for orchardgrass should stay strong, said Hoyt. “I have heard some rumors that, maybe in the northern mountains of California or southern Oregon, there may be more acres put in. But because of the strong demand, I don’t know if it is going to be enough to really lower that market very much.”
Besides orchardgrass, he also predicted “another strong price this year for timothy hay for horses.”
Export-hay demand, strong in 2012, will continue that way this year, especially to China and the United Arab Emirates (UAE). “The government of China wants to double milk production the next five years. But they’re going to have to have quality hay and they can’t currently grow much quality hay in China. They will need to buy hay here … and other places.”
Grass-hay exports to Japan will continue at a strong pace because grass-hay production is down in areas affected by radiation from tsunami-damaged nuclear power plants in 2011.
Hoyt suggested that new dairy customers in Saudi Arabia “look promising. Their government is on the same path as the UAE where it wants to not use water for crops. So it looks like, and this is the first year, they’re going to reduce the water for crops by 20%. In a five-year span, they don’t want to use any water for alfalfa hay and other crops.”
For more from Hoyt, view a video of his views on hay exports in 2013.