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.
Unprecedented price spread
Corn prices ran wild last summer, linked in part to the severe drought in the Midwest and elsewhere. Last September, rolled corn prices were $75 per ton higher than Supreme alfalfa hay, delivered to Tulare-Hanford dairies.
Hoyt said, “I have never seen this amount of price difference before. It is unprecedented to see this much of a price spread between rolled corn and supreme alfalfa hay.”
In recent months, corn prices have declined slightly. As of mid February, the price spread fell to about $30 per ton.
Hoyt said, “As long as rolled corn prices stay above the alfalfa hay price, this will tend to keep the alfalfa hay market from declining much.”
Another major reason why alfalfa hay prices have not fallen even further amid lower milk prices is spiraling exports of Western alfalfa hay from Western ports though at somewhat softer prices.
Baled alfalfa hay exports from California ports increased 25 percent last year due mostly to lower ocean freight rates out of Long Beach. Baled hay exports out of the Pacific Northwest ports of Seattle and Portland were unchanged last year, according to the U.S. Department of Commerce.
The United Arab Emirates (UAE) and China are the largest importers of alfalfa hay from the Western U.S. Last year, UAE alfalfa hay imports from the Western U.S. increased to 590,000 metric tons.
Hoyt predicted, “The UAE is currently the biggest player for Western-grown hay…More alfalfa hay will be exported from California ports to China this year compared to 2012.”
Last year, exports of Western U.S. alfalfa hay to China doubled from the previous year – a 40,000 metric ton increase – the largest uptick in several years.
Hoyt was recently told that China has 15 million milk cows and wants to double milk production in the next five years. The U.S. has about 9.2 million dairy cows.
“The bottom line is China needs more hay,” Hoyt explained. “To achieve their goal, China must purchase quality hay.”
Much of the hay grown in China is not higher quality hay, Hoyt says, so the Chinese must import top quality hay from the U.S. and other countries.
Turning to Japan, Western U.S. hay exports to Japan fell 5 percent last year, mostly due to price. However, Japan dramatically increased imports of U.S.-grown timothy hay by 42 percent.
Radiation issues tied to the earthquake and tsunami in Japan two years ago reduced timothy grass production. As a result, the Japanese government is subsidizing timothy hay imports.
Sudan hay exports from the Western U.S. to Japan climbed 8 percent, mostly due to reduced supplies of oaten hay from Australia tied to excessive rains.
For the retail hay market in the West, Hoyt says expect strong demand this year for grass hay for horses, including orchardgrass and timothy grass.
Turning to California alfalfa acreage, Hoyt expects about half of all California alfalfa acres will be planted in Roundup Ready varieties this year.
“Those who grow Roundup Ready alfalfa understand why,” Hoyt said. “Even though the seed is expensive, the grower gets better quality hay without the expense of multiple herbicides.”
Hoyt predicts the higher hard red winter wheat prices last fall will displace alfalfa acreage in California’s central and northern valleys this year.
In the Imperial Valley, Durum wheat acres are down more than 50 percent, according to the Imperial Irrigation District.
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