Typically the highest alfalfa prices in the nation are found in the wallets of California growers. Not so in 2006, a year that many alfalfa growers would rather forget sooner than later. Record setting heat in central California stunted alfalfa growth, and alfalfa's largest customer, dairies, suffered through the loss of 16,000-17,000 cows. Add to the mix depressed milk prices. Alfalfa demand soured.

Speaking to 750 growers at the Western Alfalfa and Forage Conference in Reno, Nev., in mid-December, Seth Hoyt shared a positive dairy forecast for 2007 that sparked a ray of hope for California's hay industry. Yet he shared concerns that will likely lead to an overall mixed bag for California growers.

“The U.S. Department of Agriculture is predicting an increase of $1 to $1.25 per hundredweight for milk,” Hoyt said. “If California dairymen become profitable in 2007, it will be very positive for the hay industry.”

Hoyt, senior agricultural economist with the National Agricultural Statistics Service's California office based in Sacramento, provided his hay price and trends outlook to alfalfa and forage producers from 11 western states.

“With tight alfalfa hay supplies in western states, demand and prices could be strong in 2007 or at least for the first half of the season,” Hoyt predicted. “It is questionable if production in the second half of 2007 will be sufficient to force prices lower.”

Steady to higher prices in several western states in 2006 would normally trigger more acres and production in 2007, but he said that could depend on uncertain irrigation water supplies in some western states and strong grain prices. “The state with the largest chance to decline in alfalfa hay acres is California,” Hoyt said.

For the first time in many years, 2007 could enter the history books as the year of options for California alfalfa growers. The issue — grow alfalfa or another crop.

Due to sharp grain price increases, Hoyt reported some growers have contracted red hard winter wheat at $170-$180 per ton in '07. Increased durum wheat acres in the Imperial Valley could replace alfalfa acreage. Feed corn contracts in central and Northern California last November were reported in the $135-$146 per ton range and higher. A bullish grain market suggested that prices had not yet peaked.

Thinking tomatoes

Meanwhile, strong processing tomato prices in California are causing alfalfa growers to think red. Raw equivalent tomato stocks are at a 15-year low. Hoyt said contract processed tomato prices in '07 could reach a record high in the mid $60 per ton range.

Alfalfa growers will be tempted by higher profit potential in carrots, onions, and garlic, and converting alfalfa ground to permanent crops like almonds in central California. The almond market continues its bullish growth despite heavy acreage expansion.

Hoyt said some sources predict higher Pima cotton prices in California, while Acala prices will likely fall. While some Acala ground may convert to alfalfa hay, it probably will not be significant.

Western alfalfa hay stocks will likely decrease on May 1, tied to reduced California production and drought conditions in Arizona, New Mexico, Texas, and Colorado. A strong demand for early new crop alfalfa hay in ‘07 could result.

Ample supplies of meadow/grass/pasture hay for beef cows currently exist in some western states. A normal winter should substantially draw down the stocks.

On the dairy front, Hoyt pointed to the highs and lows of milk prices in recent years. His prediction of a $1-$1.50 per hundredweight increase in the '07 all price milk price could pave the way toward profitability for California dairymen, also needed news for alfalfa growers. Yet fluctuations in the cheese market last fall are adding a dose of concern.

Reduced concentrate fed to cows will likely occur in '07 due to the highest grain prices in a decade. Grain's strength could benefit western alfalfa growers as dairies could be forced to reduce the amount of grain in rations. California alfalfa growers would especially benefit as many dairies reduced the alfalfa hay content in dairy rations in 2005-2006.

Slower increase

While the growth in dairy cow numbers is rapidly increasing in New Mexico and Idaho, increases in California will be slower until dairymen achieve black ink.

“Four or five years ago California was increasing by about 5,000 dairy cows per month, or 60,000 cows a year,” said Hoyt. “The latest figures show the an increase of less than 1,000 cows per month or about 10,000 cows annually.”

The sharp drop in dairy heifer shipments to California in '06 combined with a larger dairy cow slaughter in '05 have led to the slowdown in California's dairy expansion. Other limiting factors are air, water, and other regulations, and resistance toward building new dairies in some counties.

In the horse/retail hay market, Hoyt said the strong market for alfalfa-grass hay, orchard grass, and timothy hay would likely continue into '07. The horse/retail market on alfalfa will be firm this winter, which could be a plus for light bales for feed stores.