To really know the road conditions, we have to understand how we got to the parking lot – what that road from behind us looked like. That’s also the key to understanding hay markets – looking back to see where we’ve been helps us understand where we’re going.
Northwest Farm Credit Services recently hosted a webinar featuring Seth Hoyt, who weekly produces The Hoyt Report on hay markets throughout the West. Hoyt began his outlook 2017 report by covering the hay market road over the past two years to help set the stage for where hay prices might be going in 2017.
Carryover
To provide context for current hay prices, Hoyt said, “We came into 2016 with more hay on hand in the Western states and over the entire U.S. The 11 Western states were up 4 percent and the entire U.S. was up 3 percent, according to the USDA.”
That carryover impacted hay pricing for 2016, as producers fed supplies on hand and prices stayed low.
Addressing the carryover outlook of hay into 2017, Hoyt said hay carryover from 2016 into 2017 would vary, but Western states with a large carryover supply will include Idaho, Washington and Utah.
Regarding California hay stocks, Hoyt said, “The interesting thing about California – the carryover won’t be as big as one would think because what happened, the Imperial Valley for example, they put in a record amount of alfalfa acres but went to seed with it. So for three or four months, there wasn’t any production of alfalfa hay; it was going for seed. In the Central Valley of California … there were issues with water because of the federal water rules … so growers, after the spring cuttings, they just didn’t water alfalfa. With the fair quality, dry cow, feeder-type alfalfa being at a loss, they just didn’t water it and used the water on other crops. So I think we’re going to see maybe not as much carryover for California and Arizona and Nevada, but seeing bigger carryover in Idaho, Washington, Utah.”
Hay acres
Alfalfa hay acres were up 6 percent in the Western states, according to the USDA, and were up 2 percent over the entire U.S. in 2016. Hoyt said, “This is one thing last year that I really missed. I thought that we would see in some areas … but as far as the Western states, growers did not have options of what they could plant, and it was evident that they did plant more hay in the 2016 season.”
“Then if you look at alfalfa hay production in the Western states,” he continued, “the 11 Western states were up 8 percent and the entire U.S. up 7 percent. But again if you look at just the seven Western states, the alfalfa hay production was estimated to be up about 10 percent.” These figures were taken from the USDA estimate as of Oct. 1, 2016.
So not only did the market come into the 2016 year with more hay on hand, producers also planted more hay acres. These factors played a key role in 2016 hay prices.
Milk prices
Milk prices always have a heavy impact on hay prices. The March through June 2016 milk price was under the $14 per hundredweight mark for the Pacific Northwest, while cost of production during that same time was about $15.50 to $16. As a result, Hoyt said, dairies didn’t come into the hay market like they normally do to buy hay. They were in survival mode, so hay-buying patterns were not normal. This same pattern played out in 2009, the last time we had a depressed hay market.
Hoyt noted in 2009 when we saw depressed hay markets, dairies actually fed more alfalfa hay; however, since then the trend has been to feed lower pounds of alfalfa per head per day even though it’s not the quality they would normally feed to milk cows. Hoyt said dairies in California tended to have more silage carryover and were able to reduce pounds of alfalfa used in rations by substituting more silage. Hoyt said this trend of feeding less quality alfalfa is happening all over the West and not just in California.
Byproduct feed prices
Another factor impacting depressed hay prices has been the lower costs of rolled corn prices. After being at high levels in 2012 and 2013, rolled corn prices dipped much lower, giving dairies another option for rations – feeding more corn and less alfalfa.
In October 2014, supreme hay costs were about $140 per ton more than rolled corn. In October 2016, that spread was more like $75. Hoyt said this pricing trend applies to other areas of the West, as well. This relatively steady rolled corn pricing has helped dairies increase rolled corn in the rations while lowering alfalfa quantities.
Hay exports
In the western U.S., hay exports also impact hay pricing, but exports really need to be broken apart by country to understand where we’ve been. Hoyt said his information on the export market comes from talking to exporters.
Hoyt said although hay exports to China jumped around in 2016, China will be a big market for the U.S. in the future.
Hay exports to Saudi Arabia have increased in the past year. In June 2015, the U.S. exported around 3,000 metric tons (MT), and in August of 2016, the U.S. exported 30,000 MT. Hoyt said Saudi Arabia’s government is allowing some hay production on smaller farms, but the bigger farms and dairies are not allowed to grow it, and they’ll have to import more hay. Although Saudi Arabia’s largest dairy has purchased farms in Arizona and the southern desert of California, they’ll need more hay than they can raise throughout their dairy industry.
The United Arab Emirates (UAE) hay exports have dropped by about half since 2013. Hoyt said U.S. exporters don’t expect that market to return to the 2013 levels, and it will not likely be a growth market for U.S. hay in the coming years.
Hoyt said Japan’s alfalfa export market was down about 1 percent year to date, January through September 2016 versus 2015. This is a mature market and is not expected to be a growth market for alfalfa. However, timothy hay exports were up about 17 percent in the January to September period of 2016. Japan experienced some losses due to typhoon, and coupled with the lower levels of Canadian timothy exports due to rained-on hay and competitive prices from beef producers, the demand for timothy from Washington and Idaho grew. Hoyt said Japan has also relied on some oaten hay from Australia in the past, but more of Australia’s oaten hay is going to China now, and Chinese companies have even bought export facilities in China or have become part owners in export facilities.
2017 outlook
Hoyt noted that growers in the West would like to reduce alfalfa hay acres; unfortunately, there aren’t a lot of options to alfalfa in many parts of the West. Early indications, however, are that alfalfa acres will be down throughout the West.
Milk prices are projected to be higher in 2017, with the USDA forecasting 2.1 percent growth in U.S. milk production in 2017. Hoyt said, “It looks like if our milk price is going to get stronger, it’s going to be because we can export dairy products to other parts of the world because of a stronger world market on dairy products. And also in the U.S., another thing that we’re seeing different than other parts of the world, they’ve reduced the cow numbers in New Zealand pretty significantly, whereas our cow numbers in the latest milk production report were up about 36,000 cows over a year ago in the U.S., even though the West is not going up at that level.”
Hoyt continued, “When the dairies are making money, it’s better for not only the hay industry but also any other allied industry that services them. When dairies are making money, they tend to buy and feed more alfalfa hay to their milk cows because they want top milk production when they’re making money. When they’re losing money, they don’t care as much about increased milk production.”
In the final analysis, Hoyt said, “Years ago – and I’ve been doing these talks for 20 years – and for quite a few years, I would predict prices, but ladies and gentleman, I’m going to tell you that is a very slippery slope anymore. I cannot say where the market will be because there are so many variables. So I’m just going to give you a scenario: In 2017 a lot of what happens with the market will be a lot of ‘ifs.’ If alfalfa hay acres are down, if milk prices are stronger than they were this year, if export demand improves – particularly from China – then I could see a stronger market. But the fact remains that we’re carrying a lot of our carryover supplies of hay, as you know, as feeder hay. So it looks like the feeder hay market is going to take longer to recover in some areas of the West.” 
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Lynn Jaynes
- Managing Editor
- Progressive Forage
- Email Lynn Jaynes
PHOTO: Hay cubes are displayed at the National Hay Association convention in Pasco, Washington. Hay is cubed or compressed into smaller bales for the export hay markets. Photo by Lynn Jaynes.
