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 per cwt. 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.
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 again 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.
"What we saw in 2010, because of the financial losses in the dairy industry and the strong demand for export hay, was that exporters bought more hay and were outbidding and more competitive than dairy buyers," he says. "What it looks like for 2011 is the reverse, because of the higher milk prices and the more money dairies will have, at least for short-term purchases. They’ll be more competitive than the exporters."
In early February, rolled corn cost Tulare, Calif., area dairies $288 per ton, while top alfalfa was selling for $240 to $256 per ton.
As recently as the second quarter of 2010, the cost of milk production in California dropped to
$13.65 per cwt., Hoyt says. But state dairy costs are rising as feed prices increase and today they fall in the $15 to $16 per cwt. range.
"At those levels, the amount of corn in dairy rations will decline," Hoyt says.
Because of high corn prices, the yellow-eared crop will displace some alfalfa acreage in 2011. Hoyt says the "red-hot wheat market" and cotton—which is at its highest price levels since the Civil War—may also persuade growers to forgo alfalfa plantings for those crops. He 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.