Hay Likely to Remain Tight, Boosting Acres and Prices

January 5, 2012 08:58 PM


Roughly half of the country is experiencing dry to severe drought conditions, yet analysts are confident that the nation’s growers will seed at least the same number of acres to water-intensive alfalfa this spring as they did last year. Corn prices near $6/bu. will not be strong enough to change their minds.   
"Prices for alfalfa have gone up so tremendously that the income growers can get from alfalfa can match the income they would get from corn," says Dan Undersander, University of Wisconsin hay specialist. "Dairy regions, where farms grow alfalfa to feed it, will maintain acreage, and other regions with good markets for alfalfa will leave it in. I don’t think we’ll see a significant decline in alfalfa acreage this spring."       
U.S. alfalfa prices are at record highs, and hefty prices are occurring despite historically low cattle numbers and one of the mildest Decembers on record in the heartland, which has decreased the forage needs of dairy cows, dry cows, and beef cattle. Even so, forage demand is expected to remain strong and supplies tight.
Cattle prices are forecast to hit new record-highs in 2012 and then peak in 2013, according to Pro Farmer analysts. "With cattle prices increasing, there is interest to increase beef herds," says Undersander. Milk prices have also held up well and are expected to remain relatively strong in 2012, meaning high-quality dairy hay will also be in high demand.
Even in states experiencing severe drought for the second straight year, alfalfa growers are optimistic. "I see more people planting hay because prices and demand are both so high," says David Sterrett, a hay grower in New Mexico’s Pecos Valley and a member of the board of the New Mexico Hay Growers Association. "The Pecos Valley will be growing more alfalfa this year than last. People will probably plant less corn to make way for alfalfa." Top-quality alfalfa prices in New Mexico in late December were between $350 and $450/ton. "That’s the highest I’ve ever seen it," he adds.
Last year, Pecos Valley growers ended their five-year water allotment period in which growers were allotted 17.5 acre-feet over the entire period. By midyear last year, many growers had ran out of irrigation water, which cut into 2011 alfalfa growth and supplies. When the new growing season starts, alfalfa producers will be starting with a fresh water allotment, and precipitation in eastern New Mexico has improved somewhat. "We had a foot of snow for Christmas," says Sterrett. "We’ve been so dry for so long. It was just what we needed. We should have a good spring."
In Kansas, where some stands appear to have sustained damage from last year’s drought, growers will also likely add to their alfalfa acres. "I think we could see an increase in hay acres this year in Kansas," says Steve Hessman, USDA Hay Market News reporter. He expects most of the increase to be on non-irrigated fields. "Hay growers want to get their acreage back," he says. Hessman doubts Kansas hay growers will fall prey to strong corn prices again this year. "The current forage shortage will keep them in hay," he adds.
Larry Redmon, state forage specialist and professor at Texas A&M University agrees. "It takes a lot of water to grow either corn or alfalfa, and the return on any hay crop is pretty good right now." Moreover, he says, climbing nitrogen prices also favor alfalfa. "If I was in alfalfa, I would not be easily moved into corn."
Undersander expects an increase in acreage in Wisconsin after last year’s wet spring kept growers from seeding fields. "Some farmers want to come back to seed the alfalfa they couldn’t seed last year," he says.
Sterrett believes hay supplies are so tight and demand so strong that even if more alfalfa is planted this year and growing conditions are favorable, prices will remain high for at least another year.


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