Perhaps the best take on which way the hay market will go in the months ahead came from a CAFA source who said, “Trying to predict in 2003 is like walking through a mine field.”
When the December 2002 “all hay stocks” report indicated a 14 percent increase over the previous year, it should have signaled a downturn for early demand of alfalfa hay in the Imperial Valley. But it also appeared that increased hay stocks could be offset by growth in the dairy industry.
With higher hay stocks and milk prices at a 25-year low, however, the bearish outlook prevailed. In late March, Market News reported that Supreme and Premium alfalfa hay prices in Imperial at $100 to $110 per ton, or $22 to $26 a ton below the previous year. Several days later, CAFA received a report that a few early new crop sales of 55 to 56 TDN hay in the southern San Joaquin Valley brought $123 to $130 per ton, fob, “with around a 20 mile haul.” Being close to major dairy areas is a plus since dairymen are trying to hold down delivered hay costs.
In mid-April, a CAFA member in the San Joaquin Valley summed up the pitfalls of trying to predict which way the market will turn. “We were able to get two fields cut, raked, baled and stacked before the rains came,” he said. “Bidding closed yesterday on the first field and today on the second. We received $135 and $145 respectively for the hay. The price was great but our production on the first cutting wasn't that great; the first field didn't even do one-half ton. The second was eight-tenths of a ton.
“I am cutting the next two fields right now, hoping and praying the (weather) forecast is correct in saying there isn't going to be any more rain for the next 10 days. The yields look better in these two fields, so I'm hoping we get a ton per acre for each of them. The reason for the bad tonnage is because we didn't irrigate before the first cutting - ‘suspect price’ plus the small gain in tonnage didn't offset the cost of water to get the extra tonnage.”
A number of factors, of course, determine market direction and the one that looms largest is the economic health of the dairy industry. In a recent newsletter, the Alliance of Western Milk Producers summed up the situation by citing, “milk prices at 1970s levels with the cost of doing business at 2003 levels.”
The Alliance is banking on a program the National Milk Producers Federation is putting together. It's a three-pronged approach that includes, Reduced Production Marketing, Herd Retirement and Dairy Products Export. They make up the basis for Cooperative Working Together (CWT), a voluntary dairy industry program scheduled to start this summer.
The CWT is designed to address the problem “quickly and effectively.” If it works, there should be one less obstacle in navigating the “mine field” that CAFA's source cited in trying to predict the 2003 hay market.