Pent up demand from dairies and exporters for high-quality hay is likely to translate into profitable prices for supreme and premium alfalfa this year in the Pacific Northwest (PNW).
The most recent Hay Market Snapshot, from Northwest Farm Credit Services, also reports that drought in California may bring increased demand and higher prices for Northwestern hay.
“Even during an average year, California dairies and exporters source hay from Nevada and Oregon’s Klamath Basin,” the report notes. “With these areas also struggling with drought, tight supplies will drive California buyers to rely more heavily on Idaho, Utah and other states in the West to secure needed hay supplies.”
California hay buyers will be motivated by a variety of other factors as well. “Profitability has increased dairies’ purchasing power, while California-based exporters will have a strong interest in securing sufficient hay to protect market share (and investment in infrastructure) built over the last several years.”
While California buyers are likely to be aggressive early in the season, PNW exporters will likely allow the market to develop before making purchases. That’s assuming growers in the region can avoid the rain damage that has plagued PNW alfalfa production for the past three years. “This year, the possibility of lower hay prices in the Northwest than in California could go a long way in helping Northwestern exporters be more price competitive.”
On the risk side of things, the report notes that strong alfalfa prices could lead price-sensitive export buyers to pull out of the U.S. market. In the dairy sector, the largest risk is that record dairy-product exports, a major factor in current strong milk prices, could taper off due to increased competition and the rising value of the U.S. dollar.