Drought, Dairy Demand Expected to Boost Alfalfa Prices

February 11, 2014 05:19 PM
Drought, Dairy Demand Expected to Boost Alfalfa Prices

Hay market expert Seth Hoyt says dairies are back in the driver’s seat.

How high can alfalfa prices go?

Long-time hay market forecaster Seth Hoyt believes top-quality alfalfa could shoot to $320 per ton, well past the $280 it’s selling for this week in Central California’s dairy country.

"Where the top is, I don’t know," Hoyt said today during his annual presentation at World Ag Expo in Tulare, Calif.

The drought in the West, record high milk prices and strong demand are propelling alfalfa prices upward.

"The uncertainty of feed supplies for dairies seems to be the biggest driver in the alfalfa hay market," he said.

Milk prices have reached record highs, with February Class III futures at $23 per cwt. Herd culling among California dairies is down 10-20%. The state also has some 4% fewer heifers. "Dairies out here don’t the heifers available that other parts of the U.S. do," Hoyt said.

At the same time, California dairies have seen relief from high corn prices. The cost of rolled corn has dropped since last fall, and is now some $90-$100 per ton below supreme alfalfa hay in the Tulare-Hanford-Visalia area. The cost of production among California dairies also may be edging downward by about $1 per cwt. to around $17 per cwt.

With California’s dairies maintaining their milking strings, demand to feed the state’s 1.78 million dairy cows is strong. The drought’s water shortages are expected to curtail corn for silage, which is a major feed source for dairies. Other feed prices are also likely to jump. Almond hulls are up to $195 per ton from $140 in early January.

"This year, dairies are back in the driver’s seat," he added. "They’re making money. They will still be profitable, even with higher-priced hay because of lower corn prices."

Hoyt forecasts a 3% drop in California’s overall alfalfa hay production, to 875,000 acres this year. He doesn’t, however, expect production in California’s Imperial Valley or in nearby Arizona to decrease. Those are major alfalfa producers.

Alfalfa production in Idaho and Utah will be unchanged to slightly higher in 2014, while Washington’s output will be unchanged to lower.

Pointing to export hay demand, Hoyt said alfalfa exports to China are likely to be higher in 2014, but not as big an increase as last year. Despite its desire to boost milk production, China saw its output drop by 5.7% in 2013, Hoyt said. The Asian giant now counts about 15 million dairy cows, compared to 9.2 million in the U.S. There have been complaints among Chinese dairies about not having high-quality feed.

"China will be looking all over the world for hay supplies," he said.

World Ag Expo is expected to draw 100,000 visitors from 50 countries this week to the International Agri-Center. Some 1,500 exhibitors are on site to display their products and services at the annual farm and equipment show.

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