Winter precipitation, corn, and milk prices will be the major drivers behind the steering wheel of the Western alfalfa and forage truck in 2014.
In California, the supply of water for irrigation will remain the top driver’s seat issue.
“Everything I share with you about the price outlook for alfalfa hay can be thrown out the window if we have another dry year,” said Seth Hoyt, veteran Western hay market analyst.
Hoyt, author of The Hoyt Report weekly newsletter, delivered his 2014 market projections to about 600 alfalfa and forage enthusiasts during the Western Alfalfa and Forage Symposium held in Reno, Nev., in December.
An early winter forecast developed for the California Department of Water Resources painted a third consecutive moisture-short winter on top of already limited water supplies.
“It’s a slippery slope without knowing what the water situation will be. It’s a real crap shoot,” said Hoyt. “If we don’t receive enough water then all bets are off.”
In 2014, Hoyt believes Central California-grown supreme alfalfa hay could fetch $245-$260 per ton fob stack, depending on the irrigation water situation and due to fewer alfalfa plantings tied to potential water shortages.
Due to a low corn market, Hoyt expects supreme alfalfa hay prices in the $180-$200 per range in Idaho, Washington, and parts of Nevada. Prices could push into the low $200’s in some areas outside of California on higher test alfalfa hay.
“It’s a slippery slope without knowing what the water situation will be and a tough one to call,” said Hoyt. “If we don’t receive enough moisture then all bets are off.”
With tight supplies of higher quality alfalfa hay and pent-up demand, Hoyt believes Central California dairy hay buyers will show strong demand for first cutting Supreme quality alfalfa hay from the southern California and Arizona deserts in March 2014.”
He predicts the price for first cutting supreme alfalfa hay in the Imperial Valley this next spring could be $215-$230 fob stack; the same or slightly higher than the Spring 2013 price of $215-$220 stack.
“This is contingent on dairies remaining profitable,” Hoyt explained.
“If milk prices fall and dairies go into a negative financial position then that will change the demand from dairies. I think the market could ease on the second and third cutting of alfalfa hay in the Imperial Valley, but how much really depends on irrigation water supplies in the Central Valley.”
If drought conditions persist in Central California with no increase in spring-planted alfalfa hay, top alfalfa hay prices might not slip much for southern desert spring hay, particularly if dairies are profitable.
Lower corn prices
The significant fall in corn and wheat prices is a boom for Western dairymen and a bust for alfalfa growers. In September, corn delivered to Hanford-area (Calif.) dairies sold for about $300 per ton. Three months later (December), the price dropped about 25 percent to $216 per ton.
Lower-cost corn will encourage dairymen to replace some alfalfa in milk cow rations with more corn. Hoyt expects the pounds of alfalfa hay in milk cow rations, which was 9.5 pounds in the second quarter of 2013, to decline to 8.75-9 pounds by the end of 2013.
“This trend of more corn and less alfalfa in milk cow rations will continue throughout the West,” said Hoyt.
Yet this could be tempered if protein feed prices remain at higher levels. This could make higher quality alfalfa hay with high protein content more attractive to dairymen.
The hay analyst predicts mixed alfalfa acreage for the West overall; down slightly overall in California but not as much as Hoyt previously thought.
“There is no doubt that alfalfa hay plantings in the central and southern San Joaquin Valley - the largest alfalfa growing area in California - will be down in 2014 due to water concerns,” he said.
“If there is above normal rain and snow pack and the irrigation water picture improves by late winter, the result could be increased spring alfalfa plantings in some areas which could push overall alfalfa hay acres higher.
Hoyt says irrigation district reports suggest that alfalfa hay acres predicts acreage could increase about 7 percent in California’s Imperial Valley and 13 percent higher in the Palo Verde Valley.
Some seed company representatives in Arizona see more alfalfa acres on the radar screen in 2014. Additional acreage is also expected in Utah and Idaho. Ground planted in alfalfa in Washington could hold steady or edge slightly lower.
According to the USDA, western alfalfa acreage increased 6 percent overall in 2013 while California acreage fell 5 percent. Alfalfa hay production in the West rose 4 percent while California production was 4 percent less.
About two-thirds of the alfalfa hay in the West goes to dairies, 12 percent for export, and 10 percent for retail. The balance is for beef cattle, including cattle in feedlots and auction yards, and a small amount for sheep.
The largest export market for western-grown alfalfa hay is the United Arab Emirates (UAE). Shipments to the UAE totaled about 650 million metric tons in 2013; a 9-percent increase from the previous year.
Hoyt’s export contacts are mixed on whether the UAE will purchase more U.S. alfalfa hay in 2014.
These contacts believe West Coast alfalfa shipments to China will increase. This follows on the heels of a whopping 60-percent increase in U.S. alfalfa hay sold to China in 2013 to help feed the country’s estimated 14 million dairy cows.
According to his contacts, it is easier and cheaper to ship alfalfa hay containers from the port at Long Beach, Calif. to China than moving hay from Central China to the dairies on the country’s east coast due to poor infrastructure.
“My export sources suggest that China will be a strong importer of western alfalfa hay for the next five years,” Hoyt said.
These same sources contend that Japan and Korea are now mature markets with limited growth potential in the near future.
Hoyt added, “The weak Japanese Yen has definitely been a game changer on exports to Japan and will be a big factor again in 2014.”
The weaker Yen has increased the cost of West Coast hay for Japanese dairy and beef producers.
Looking at exports overall, West Coast baled alfalfa hay exports increased 5 percent in 2013 compared to the previous year. Hay exported from California ports pole vaulted 19 percent.
Baled hay exports from the Pacific Northwest (PNW) ports dropped 7 percent in 2013 from the year prior. Shipments have increased in recent months as more alfalfa hay is being exported from the PNW.
This is expected to ease back in the first quarter of 2014 as California ports export more West Coast alfalfa hay exports to China.
Looking at the retail grass hay market, premium retail orchardgrass hay in Northern California and Southern Oregon averaged near a record high $272 per ton in 2013.
Hoyt predicts strong demand for retail orchardgrass and timothy hay in 2014.
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