New crop Western-grown premium alfalfa hay this spring could fetch slightly lower income for growers if unprofitable milk prices continue to impede dairy profitability, says respected hay market analyst Seth Hoyt.

Hoyt, author of The Hoyt Report monthly newsletter, shared his 2013 price and demand outlook for alfalfa and grass hays during the California Alfalfa and Grains Symposium in Sacramento, Calif.

“If the milk price is not profitable when the first cutting of alfalfa hay comes off in the Imperial Valley this spring, hay prices could fall below the $240-$250 FOB price per ton received last year,” Hoyt told the crowd.

Hoyt’s prediction is not a crystal ball view of the future. His outlook is based on 23 years with the California Market News Branch at the California Department of Food and Agriculture. Hoyt worked nine years for the National Agricultural Statistics Service.

(See related: Market trends high priority at forage and grains symposium)

Hoyt says early supreme hay from the Southern California and Arizona deserts should find good demand, but price is another matter.

A similar scenario is likely for premium and supreme alfalfa hay this spring in California’s Central Valley.

“Prices for alfalfa hay going into Tulare for $290-$300 a ton last spring will not work if the dairies are in a negative cash flow situation,” Hoyt said.

Farm-gate milk prices have risen and fallen like a yo-yo over the last four years. Hoyt called 2009 prices received by dairymen a “train wreck.” Dairymen enjoyed profitability in 2011. Lower prices last year pulled many dairymen back into the negative cash flow column.

Low milk prices have placed many California dairies in a dire financial squeeze. About 100 California dairies exited the business last year, largely tied to milk prices below the cost of production.

As a result, the dairy industry will buy less hay this year.

Hoyt said, “One hay dealer in Hanford (Calif.) told me last winter he was selling hay to 11 dairies. This winter only two of the 11 dairies are left.”

In addition to milk prices, other issues which impact alfalfa hay prices include silage and grain corn prices, plus old-crop hay numbers. Hoyt says California currently has about 2 million tons of hay stocks on hand, up 20 percent from December 2011.

Wheat plantings will displace alfalfa hay in central and northern California this year due to a strong hard red winter wheat market, particularly last fall. However, Durum wheat acres in the Imperial Valley will be down from last year.

To partially offset the lost demand by California dairies, Hoyt says exports of Western alfalfa and grass hays are expected to increase this year.