South Dakota hay prices will likely stay on the high side throughout the 2013 marketing year. That’s due to what looks like extremely tight hay stocks coming out of the winter, combined with low expected production in the growing season ahead, says Matt Diersen, ag economist at South Dakota State University Extension.
Hay stocks in the state, as of last Dec. 1, totaled just 4.3 million tons. That’s the lowest stocks level since Jan. 1, 1977. If livestock producers fed up one-sixth of the stocks each month since Dec. 1, Diersen calculates, only “a paltry” 720,000 tons will remain on May 1. “Most years, producers try to maintain a surplus over that level.”
High hay prices may have also pulled some stocks, originally intended to be used as feed, into marketing channels, he says. “Factoring in the high price level actually forecasts a negative stocks level for May 1.”
In its March Agricultural Prices report, the National Agricultural Statistics Service (NASS) reported an average alfalfa price of $230/ton in South Dakota. For other hay, the state price was $170/ton. In real, inflation-adjusted dollars, the “other hay” price in 2012 works out to around $100/ton. In 2002, another drought year, the real price was $79/ton. In the 10 years since, the real price in South Dakota didn’t top $70/ton, Diersen says.
Ordinarily, the record prices could be expected to pull a lot more acres into hay production, he adds. But in its March 2013 Prospective Plantings report, USDA estimated just 3.1 million acres of hay would be harvested in South Dakota this year. That’s the same amount put up in 2012.
Solid expected returns for other crops and the presence of revenue insurance are key factors likely to limit this year’s hay acreage, Diersen says.