Alfalfa Hay Prices Soar

March 11, 2011 11:30 PM

Driven by limited carryover supplies and renewed demand from California dairies, alfalfa hay is soaring to new price levels and this year’s crop could reach its second-highest prices ever, says Seth Hoyt, whose hay market analyses and insights are widely followed.

"I’m bullish on hay prices because of the lower acreage we’re going to see in the West, the small carryover from 2010 into 2011 and the outlook for stronger milk prices in the $17.50 to $18 per cwt. range in the next few months," he says.

Hoyt projects alfalfa hay from the Imperial Valley, a major alfalfa-producing area in Southern California, will be $190 to $200 per ton for the first cutting, which began in February. In California’s Central Valley, where alfalfa growers will harvest their first cutting in early April, Hoyt predicts prices of $220 to $230 per ton fob.

In Utah, another major hay production area, Hoyt foresees first-cutting prices of $170 to $180 per ton, and in Idaho and Washington, $180 to $200 per ton.

"We haven’t seen those kinds of prices since 2008," he says. "They would be the second-highest prices ever if that happens."

Overall, alfalfa hay has risen by $50 per ton since November 2010, he adds.

Exports boost prices. Improving demand for milk powder, butter, whey and cheese, especially in Southeast Asia, is boosting milk prices. "Fifty percent of the powder being produced in the U.S. is being exported," Hoyt says. "Even as the U.S. economy is improving, other places in the world are rebounding even more quickly."

In fact, Hoyt foresees strong competition between U.S. dairies and the export market for alfalfa hay.

"In 2010, because of the financial losses in the dairy industry and the strong demand for export hay, exporters bought more hay and were outbidding and more competitive than dairy buyers," he says. "For 2011 it’s the reverse because of higher milk prices and the more money dairies will have, at least for short-term purchases. They’ll be more competitive than exporters."

Acre game. High market prices will help corn displace some alfalfa acreage in 2011. Hoyt forecasts alfalfa acreage to decrease 10% to 15% in Washington and Idaho and 5% in California, Utah and Arizona. He expects Nevada’s 2011 alfalfa acreage to be unchanged.

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