What is in this article?:
- Challenges reduce profitability for Western alfalfa
- Unprecedented price spread
- Western alfalfa prices will continue softer than a year ago due to tough financial times in the dairy industry and export buyers who want to pay less for hay than last year.
Dean Morrell of AGCO discusses the Hesston 1844 three-string baler during World Ag Expo in Tulare, Calif., in February. This year’s Expo included about 1,500 exhibitors plus about 100,000 visitors from 60 countries.
California market analyst Seth Hoyt predicts Western alfalfa prices will continue softer than a year ago due to tough financial times in the dairy industry and export buyers who want to pay less for hay than last year.
The combination of these factors spells reduced profitability for Western alfalfa growers.
Seth Hoyt, author of The Hoyt Report, a weekly online subscription-based hay market newsletter, shared his latest views on the Western alfalfa industry with a standing-room-only crowd during the 2013 World Ag Expo (WAE) in Tulare, Calif., in February.
Hoyt predicted the first cutting of Supreme quality hay from California’s Imperial Valley would sell this spring in the $220-$230 per ton fob stack range. By mid-March, the price had dropped to $215-$220 per ton.
First cutting Supreme alfalfa hay from the Central Valley this spring should fetch from $240-$250 per ton fob stack, Hoyt said.
Both price levels are about $20-$25 per ton lower than this time last year.
“Lower alfalfa hay prices are due to the price of milk, not the supply of hay,” Hoyt told the crowd. “Most dairymen are not making money.”
Hoyt added, “All bets are off on Western alfalfa hay prices if California milk prices move upward to $19 per hundredweight or higher.”
At press time, the California overbase milk price was $16.30.
Alfalfa hay prices could strengthen if dairymen become financially sound, especially in the Central Valley which is home to around 1.2 million dairy cows.
Hoyt’s experience on alfalfa and forage hays includes 28 years with the Market News Branch at the California Department of Food and Agriculture. Hoyt served nine years as an agricultural economist with the National Agricultural Statistics Service; both positions in Sacramento.
He launched The Hoyt Report in March 2008.
Current low milk prices translate into unprofitability for dairymen which are taking a heavy financial toll on bottom lines.
In 2000, about 2,200 dairies were located in California, according to the California Department of Food and Agriculture. The number has decreased to about 1,600 dairies. This is a 27 percent reduction over the last dozen years, tied to lower milk prices and other factors.
“Due to the financial strain in the California dairy industry, I estimate California lost about 100 dairies last year,” Hoyt predicted.
California dairies are in a worse financial situation than any other dairy state in the nation, Hoyt says, due to higher production costs, plus lower milk prices tied to more milk used for processing (cheese and powdered milk) than fluid milk sold at retail stores.
While lower California milk prices are driving Western alfalfa prices lower, higher prices for rolled corn in the cow ration are a bright spot for alfalfa growers. Dairymen are reducing the amount of more expensive corn in the ration and feeding more lower-priced alfalfa hay.
Early last year, alfalfa hay fed to milk cows in California fell to 8.9 pounds, compared to 9.5 pounds in 2011. The rolled corn price spike caused dairymen to increase the hay in the ration to an average of 10 pounds per head per day in the fourth quarter of 2012.
“This is the reason why hay prices haven’t dropped more than they have,” Hoyt said.