Alfalfa and other hay exports will increase in California and the West in 2013, said Seth Hoyt, market analyst and author of The Hoyt Report newsletter.
Predicting where alfalfa hay prices are headed, however, is “a tough call” – due largely to the uncertainty in where milk prices will be, he told those attending the December California Alfalfa & Grains Symposium in Sacramento.
“In May and June of 2012, overbase milk prices in California dropped just under $14/cwt and then were on the rebound to around $18.50/cwt in October and November. However, the estimated price for December would drop to around $17.50,” said Hoyt.
“Experts last summer were talking about $20-22/cwt milk starting this month (December) and going through the first half of next year, but we’re starting to see them go down. If the milk price is not profitable when that first cutting of alfalfa hay comes off in the Imperial Valley, I don’t think we will be able to get that $240-250 f.o.b. price that I predicted in October. If the dairies are not in a profitable situation, then those prices could be $20/ton too high.”
In 2012, alfalfa hay prices could have been a lot lower if there hadn’t been a strong export demand and higher corn prices after June, he said. Tulare-Visalia-Hanford supreme alfalfa-hay delivered prices dropped only by $10/ton – to $293/ton – compared to the 2011 average price of $303/ton.
“If you compare the price of supreme alfalfa hay to rolled corn, as that corn shot up in July and August (to as much as $360/ton delivered), hay was a much better buy,” Hoyt said. California dairies increased the amount of alfalfa hay fed – from 8.95 lbs/cow/day in the first half of the year to 9.5 in the third quarter. “Normally they would be able to fall back and feed more silage when the high corn price is like it is. Unfortunately, there were an estimated 45,000 fewer acres of corn for silage in California in 2012.”
West Coast baled-hay exports in 2012 increased by 10% over 2011 exports, with California ports handling a 23% spike in business vs. a Washington port increase of 1%. “Lower ocean freight rates out of Long Beach and San Francisco, particularly Long Beach, are drawing more hay from other states into California,” Hoyt explained.
Exports to China, totaling 177,000 metric tons (mt) in 2011 and already at 293,000 mt by last October, may be double last year’s total in 2013. “The growth in the (Chinese) dairy industry is robust. It is growing significantly and, as it is growing, it needs hay.”
The United Arab Emirates will likely be a good alfalfa hay customer, and the Saudi Arabian market also shows potential in future years. Hoyt’s mystified by Japan’s decline in U.S. alfalfa hay imports – 5% – compared to the 2011 volume.
“I don’t have a lot of explanation for what is going on there on alfalfa hay, but grass hay volume going into Japan was definitely higher. When you look at the timothy exports – tremendous.” Timothy exports going into Japan from the U.S. were up 42% from what they were in 2011, he said. The reason: Radiation from nuclear power plants damaged by the 2011 tsunami disrupted the country’s grass hay production.
A poor Australian oat-hay harvest also helped boost timothy hay and sudangrass hay exports to that country last year. “The outlook for 2013 is that Australia’s oat-hay crop looks to have very good quality. The problem is its yield is down about 25-30% in volume.”
In the retail hay market, horse owners want orchardgrass and timothy. “The orchardgrass market today in the northern mountain markets, the premium stuff, is about $300-305 out of the barn. It looks like the grass hays will stay in strong demand.”
Alfalfa hay acres should generally be unchanged to lower in the West. In California, nearly 12,000 fallow acres will go back into alfalfa production in the Palo Verde Valley (Blythe area) because the metropolitan water district needed less water under a long-term water agreement. Central and northern parts of the state will see fewer alfalfa acres planted, and Hoyt estimates that there will be 3-5% fewer alfalfa hay acres in California in 2013.