What is in this article?:
- First cutting alfalfa price projections lowered
- Too much milk
- California dairymen are producing too much milk for the market, and once again have moved into a negative cash flow scenario.
- Dairymen in the Central California milkshed do not want to pay more than $300 per ton for premium, first cutting hay delivered to Central California. A Central California dairy recently purchased a year’s supply of 4,500 tons of 55 TDN alfalfa from a western Nevada hay grower for $230 per ton fob.
- Another contract was signed for 7,000 tons of hay from the “eastern mountain” area of California for $245 per ton.
Too much milk
Hoyt admits that hay growers may be perplexed at lowering prices in a short-supply market; however, growers need to put more weight on the demand side when pricing this year’s first cuttings because of the negative cash flow at the dairy.
“We are just producing too much milk,” Hoyt said, noting that one Pacific Northwest processor is now penalizing dairies which deliver over base milk. A similar situation occurred in California two years ago.
Dairymen have reacted to recent high alfalfa prices by feeding more silage and rolled corn and less alfalfa.
California dairymen were feeding milk cows an average of 8.6 pounds of alfafa per day in the third quarter of last year. In 2010 the average was 11.15 pounds per day.
Unlike last year when alfalfa replaced high price corn, corn could become more attractive than alfalfa as corn prices drop. “Some are estimating corn will be down to $5 per bushel in the next three to six months. This translates to $240 per ton for rolled corn (delivered Tulare) versus the current $282 per ton and the peak last year of $330 per ton,” he said.
The hay export market remains strong, but Hoyt noted that it still represents only about 15 percent of the West Coast hay market.
He cited Japan, United Arab Emirates, China and South Korea as the most robust export markets.
There has been “tremendous growth” in hay exports to China.
“China’s dairy market will grow. Nestles, the world’s largest food company, is really getting strong in China,” Hoyt noted.
“They are training Chinese dairymen on how to handle 500 cows rather than five or 10 cows. Nestle is also guaranteeing loans to China,” he added.
This bodes well for more hay moving from the West Coast to China.
“China wants to grow more alfalfa and agronomists have gone there to help. So far, however, they have not been successful in growing quality hay. With the Chinese infrastructure, it is easier to import hay than to grow it and move it around the country,” added Hoyt.
He also said the recently approved South Korean free trade agreement should bolster hay sales to that nation.