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Monday, July 28, 2014

Harvested hay projected down in 2014

by Traci Eatherton, WLJ Managing Editor

USDA’s June Acreage report doesn’t appear to give much hope for 2014 hay prices to come down much, with producers harvesting less hay compared to previous years. But Washington and Oregon, according to the report, seem to be holding their own, with a banner year expected in hay production.

Across all hay types, 57.6 million areas are expected to be har vested, down from the 58.3 million acres harvested in 2013 and the 58.3 million acres projected in the March forecast, according to US- DA. There is a slight increase in alfalfa, 2 percent projected yearto-year in harvested areas. But acreage is up 160,000 in Washington and 30,000 in Oregon, according to USDA’s report.

Dry conditions have reduced hay harvested acreage forecasts in some states, including California. While in the upper Midwest and Northern Plains, timely spring precipitation is credited with expanding regional hay production, which has kept the spread a little closer.

Industry sources report that recent wet weather in sections of the Midwest including Wisconsin, Minnesota, and Missouri have delayed harvests, potentially leading to increased yields, though at the expense of hay quality.

For the week ending on July 7, fully 56 percent of U.S. pastures and ranges were rated as good to excellent, according to USDA. This compares with 49 percent in 2013. In California, New Mexico, and Arizona, where soil moisture is lacking due to drought conditions, between 58 and 75 percent of pasture and ranges are rated as poor to very poor. Demand for dairy hay in California and sections of the Southwest is likely to place pressure on local supplies, encouraging movement of hay from the Midwest to these areas and providing support for robust alfalfa prices.

Supplies remain short and prices high in California, according to Norm Beach, Vice President of the San Joaquin Valley Hay Growers Association (SJVHGA) in Tracy.

As a result, some dairy farmers are switching from hay to alternative feeds—lower priced commodities like canola, he explains.

“It’s really slowed down the hay trade. The hay price is so far out of whack with what they can get commodities delivered for,” Beach shared on HayandForage- Grower.com.

High-test hay still sells well throughout California, but the market for lowerend crop has dropped off. He sold feeder hay recently for $275/ton delivered, down from $310-315/ton earlier in the summer.

“That’s still a really good price, but it’s just not where it was.” Beach expects prices to creep upward as fall approaches, unless hay growing conditions improve dramatically in the droughtstricken West.

While some parts of Texas have been lucky when it comes to hay production, others will likely have an expensive go at feeding cattle this winter, according to a Texas A&M AgriLife Extension Service expert.

“We’ve been blessed with rainfall during our spring and even during the midsummer in east Texas,” said Dr. Vanessa Corriher-Olson, AgriLife Extension Forage Specialist, Overton. “So hay production in the eastern part of the state has been higher than other areas.”

Though the rest of the state has received some rain, drought conditions persist, which has, of course, pretty much stymied hay production in much of the state, Corriher-Olson said.

“Part of central Texas, around Waco and along the I-35 corridor, did receive some rainfall, but not as much as we have had in east Texas, and probably did not provide much improvement in hay production,” she said.

West central Texas also received some good rains in late May and early June, which helped hay production, but the area remains under moderate to severe drought, according to the U.S. Drought Monitor.

Though hay production has been good in east Texas, it hasn’t been as good as it might have been because of the frequent rains, Corriher-Olson noted. Mid-summer is usually a drier time for east Texas, which is conducive to curing and harvesting hay. But frequent rains have made it a challenge in some areas to get the hay in.

She also said she hasn’t seen much hay moving out of east Texas or out of the state.

“Some are rebuilding their stocks, and many have pastures that are still recovering from the drought of 2011 and subsequent droughts,” Corriher-Olson said.

With pastures still in recovery, livestock producers will need hay to make up for lack of grazing.

She also noted that with the chances of a moderately strong El Niņo this fall, the prospects for winter pasture are better than they have been in years. A strong El Niņo usually means a wetter late fall and winter for all of the Southwest and Southeast U.S.

“This presents us with an excellent chance to reduce costs and preserve hay stocks, not just in east Texas but in central Texas and other areas too,” she said.

A decline in U.S. hay production during the 2012 crop year (May through April) drove prices higher for ranchers and dairies across the country. Sixtythree percent of the nation’s hay acreage, centered in the Midwest, was in an area that experienced drought. U.S. hay production fell 9 percent to 109 million metric tons (MMT), hitting the lowest production level since 1964 and the lowest yield since 1976. Alfalfa production, which accounts for approximately 40 percent of export volume, is estimated at the lowest level since 1953 while production of other grass hay is at the second-lowest level since 1998. At 69 MMT, hay stocks are at the lowest level since 1957.

Exports

A hay production shortfall has not been an obstacle to record export performance in Washington, California, and Oregon where 95 percent of hay exports originate. Overall 2012 hay production increased 97,000 metric tons (MT). Additional acreage in California offset yield declines in Washington and Oregon. U.S. export forage originates in areas close to West Coast ports and accounted for less than 4 percent of national production in the 2012 crop year.

U.S. hay shipments set new records to the top five markets in 2012. Japan, which accounts for about half of U.S. hay exports, imported nearly $600 million in 2012—an 18 percent increase in value despite a 5 percent decline in volume. Japanese dairy farmers are major users of U.S. hay, and demand is expected to climb despite higher prices. Meanwhile, Chinese imports spiked 84 percent in value compared to 2011, while volume increased 78 percent. U.S. alfalfa’s reputation for quality and ability to improve dairy yields drove Chinese demand. In the Middle East, import demand is also rising due to government mandated water conservation efforts that limit domestic production.

Rising global demand for premium forage products, along with higher prices, drove U.S. exports of hay to a record $1.25 billion in 2012. From 2008 to 2012, hay export value rose 93 percent while volume increased 39 percent. During the same time span, average domestic hay prices outpaced export prices, increasing 44 percent and 39 percent, respectively. However, due to market fragmentation, higher prices in the Midwest have not undercut demand for export forage sourced from the western United States.

The growth outlook is promising for U.S. forage exports to the Middle East and East Asia, according to FAS. In the United Arab Emirates (UAE), by far the largest hay importer in the Middle East, the government supports forage imports for non-commercial livestock owners in the Abu Dhabi Emirate. Officials intend to expand the scheme to benefit farmers in other Emirates, further increasing the demand for hay imports. Forage production in Saudi Arabia will completely phase out by 2016, resulting in another emerging market for U.S. exports. In East Asia, recognition of the role premium forage plays in boosting dairy production continues to shape growth prospects for U.S. hay. U.S. hay exports face increasing competition from other suppliers, particularly Spain and Australia, but should continue to grow due to high quality and efficient production practices that result in more cuttings per season, which expands exportable supplies.

Through its partnership with FAS, the U.S. Forage Export Council (USFEC), which represents 80 percent of U.S. exports of straw and hay, has made significant contributions to improve growth prospects. In recent years, USFEC opened the Chinese market for alfalfa by working closely with U.S. and Chinese governments to conduct inspection tours and negotiate protocols. In the Middle East, USFEC is leveraging FAS market development programs to strengthen ties with local governments. In mature markets like Japan, USFEC opened communication channels to end-users through articles in trade magazines targeted to the beef and dairy industries.

California: Compared to the previous week, premium and supreme hay was mostly steady. Hay below good quality traded $3 lower last week. Demand was light to moderate on low test hay and good to very good on milk test hay. Wheat straw is showing a firmer undertone as many dairies are using it in place of alfalfa in their rations. With June in the books, National Climatic Data Center rankings for California for the July 2013-June 2014 period were the warmest and third driest since 1895. The only drier July-June periods were in 1923-24 and 1976- 77.

California saw supreme alfalfa selling for $290/ton and premium orchard grass selling for $260-290/ton, in the Northern mountain areas. In the Sacramento Valley area, premium alfalfa sold for $290-320/ton, and alfalfa oat mix sold for $250/ ton. Premium orchard grass sold at $320. In the San Joaquin Valley, supreme alfalfa sold for $345/ton.

Wyoming, western Nebraska, and western South Dakota: Compared to the previous week, all classes traded steady on very light demand. Central and western Wyoming and western South Dakota were finally able to get started cutting. Rain and wind have been plaguing areas, making for later starts or reduced quality of hay.

In eastern Wyoming, large round premium alfalfa bales sold for $225-230/ton and fair sold for $140/ton. Small squares of alfalfa/ grass mix in good condition sold for $175/ton. Central and western Wyoming saw some small squares of premium alfalfa sell for $285/ ton. In western Nebraska, delivered alfalfa was selling for $150/ton. And western South Dakota sold good alfalfa large rounds for $150/ ton, and fair at $125/ton.

Texas: Compared to the previous week, all hay prices were steady to weak.

Trade activity was slow to moderate on light to moderate demand. Dairies continue to back off the market since milk prices have come down. Freight continues to play a key factor in how far brokers are willing to haul hay in order to cover their costs.

East and south Texas have a good crop of Coastal Bermuda that have benefitted from rain in the area.

In the Panhandle and high plains, alfalfa small bales, delivered, and premium to supreme were selling for $330/ton or $10 per bale. Grass mix was selling for $7 per bale. Chopped alfalfa was delivered to feedlots at $200-225, calf hay $245-290, and brown $185-190. In west Texas, small squares of premium to supreme alfalfa were selling for $265/ton or $8 per bale. Large bales were $270-285/ton.

Montana: Compared to the previous week, lower quality alfalfa, rained on/ weedy, hay was steady; higher quality alfalfa had no comparison available as this was the first reported trade as first cutting was very delayed this year. Demand has lessened a bit as some of those areas that were short on hay supplies have met their immediate needs for the time being. Alfalfa hay growers are busy trying to put up their first cutting in between rain showers. Pre-bloom alfalfa was very hard to find as growers waited out the rain to put up dry hay. Not much hay reported sold yet overall.

Good small squares of alfalfa sold for $200/ton and large squares and rounds sold for $250-160/ton. Premium bales of timothy grass, old crop, sold for $180/ ton. — Traci Eatherton, WLJ Editor

 
 


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