Low Corn Prices Weigh on Alfalfa Demand

November 14, 2013 10:10 PM
Low Corn Prices Weigh on Alfalfa Demand

Falling corn prices over the past few months have dragged hay and alfalfa prices lower as well. While it’s still too early to say for sure, some analysts expect hay growers who converted marginal stands into cornfields over the past few years to shift back into alfalfa next year.

Demand for hay and alfalfa has softened as dairy and cattle producers supplement high-priced hay for lower-cost corn silage.

"Kansas has a surplus of hay and a lack of demand," says Steve Hessman, USDA hay reporter, Dodge City, Kan. "The western half of the state has good surface moisture but still lacks subsoil moisture. The eastern half of the state is back to normal."

Premium-quality dairy alfalfa was priced near $210/ton this week in Kansas, f.o.b. the grower, about $50-75/ton lower than a year ago. Hay is also plentiful in Colorado and California but not all of it is top quality.

"In Colorado there’s a lot of rained on hay, stack-damaged hay," says Tess Norvell, reporter with USDA Market News, Greeley, Colo.

The Monsoonal weather flow that passed through California’s Imperial Valley in late August and early September also left a lot of rain-damaged hay in its wake. Due to early water restrictions in California’s Central Valley, the alfalfa yield there was reduced, but prices are still falling on the top-quality hay that’s available.

Depressing Demand

"Demand from the dairy market is not as strong as it has been in past years," says Norvell. "Dairy producers now have a substitute. You aren’t going to pay $400 for hay when you can buy corn for $4."

"The poor-quality hay is putting downward price pressure on all the hay markets," notes Norvell. For instance, she says, premium-quality large, square bales at $230-240 in northeastern Colorado are $20-45/ton lower than last year.

As temperatures drop and winter storms pick up, Hessman says demand for alfalfa will likely pick up and prices could move higher. "With a mild, open winter, prices could soften," he adds.

Shift Back to Hay?

Looking ahead, some corn acres could shift back to dryland alfalfa next year, particularly in central Kansas where subsoil moistures have recharged.

"Hay is forgiving," notes Hessman. It can go dormant during a dry period, then start growing again if rains return. Kansas alfalfa growers who put marginal alfalfa stands into corn the past couple of years will probably shift those circles back into alfalfa if corn prices stay low.

"Because Kansas growers produced more tons, they will be as well off as last year," says Hessman. "The bottom line should be as good or better even with lower prices because they have more to sell."

Elsewhere the picture is not quite as bright.

"I think it’s too early to tell what Colorado and California producers will do," says Norvell. "Alfalfa is weak, too, so I don’t seem them jumping ship right away."

Alfalfa production this year is projected to be 15.14 percent greater than a year ago at 59,926 million tons, but last year’s output of 52,049 million tons was the lowest since the drought of 1953, which covered a wide swath of the Corn Belt and the southern Great Plains.


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