Alfalfa symposium speakers
Speakers at the 2016 California Alfalfa & Forage Symposium included from left: Californians Dan Sumner, University of California Ag Issues Center, Davis; Steve Orloff, UC Cooperative Extension farm advisor, Siskiyou County; Seth Hoyt, The Hoyt Report, Ione; and Eric Erba, California Dairies Inc., Visalia.

Western alfalfa prices could trend higher in 2017

After two consecutive years of lackluster prices and unprofitability for many western alfalfa growers, 2017 could include higher returns for hay if several key scenarios play out.

After two consecutive years of lackluster prices and unprofitability for many western alfalfa growers, 2017 could include higher returns for hay if several key scenarios play out.

Western hay market analyst Seth Hoyt calls these scenarios the “Big If’s.” Hoyt is the editor of The Hoyt Report weekly alfalfa market newsletter.

“Alfalfa hay prices could be stronger in 2017 if western alfalfa hay acres are down, milk prices are stronger than 2016, and if exports continue to grow, particularly to China,” said Hoyt, the opening keynote speaker at the 2016 California Alfalfa & Forage Symposium held Nov. 30 – Dec. 2 in Reno, Nev.

“If most of these factors occur, alfalfa hay prices could be stronger in 2017,” Hoyt says.

Even if prices shift north, could growers reach profitability? This is a large unknown. In the West, alfalfa hay is mostly sold to dairies for milk cow feed, is exported abroad, and for other uses including retail hay.

PRICE DRAG

Factors which tend to dampen the alfalfa hay market include large inventories of feeder hay-dry cow hay, currently found in Idaho and Washington State. California has hay inventories but Hoyt says the numbers are not as large.

“In some parts of the West, high inventories will be a price drag,” Hoyt told the 700 alfalfa-forage industry member crowd.

Yet possibly helping the alfalfa market are current lower prices for wheat. Reduced wheat straw in cow rations could be replaced by additional alfalfa hay.

“If wheat straw supplies decline, it could help bring the alfalfa hay market back faster in California,” Hoyt noted.

He also shared recent USDA-NASS and U.S. Commerce Department statistics on western-based hay stocks, alfalfa acreage, and milk prices – cornerstones to higher alfalfa prices. On average, NASS says 2016 western-state hay stocks were 10 percent higher with more hay on hand at dairies compared to 2015.

On acreage, California farm land planted in alfalfa hit the 1.1 million acre mark in 2006 and has mostly retreated since, due largely in the last five years to drought. NASS pegs 2016 California acreage at about 875,000 acres. However, Hoyt believes the actual number was closer to 830,000 acres.

MILK PRICES

On milk prices, Hoyt says milk prices in the Pacific Northwest Order in Spring 2016 were under $14 (uniform price) and prices increased slightly by late summer. The California milk price hit a low in May 2016 at $11.83 (overbase price) – under the cost of production.

While dairymen are always looking for more frugal feed options while maintaining high quality milk production, the percentage of alfalfa hay in milk cow rations continues to drop. In 2014, less than 12.5 pounds of alfalfa hay was fed per head on average to California dairy cows, compared to 8 pounds per head in 2016 – about a 33 percent reduction.

What’s taking alfalfa’s place? Concentrate for one. Concentrate is mostly grain or feeds other than hay and silage in a milk cow ration. Corn prices and almond hulls have been priced competitively with supreme alfalfa hay so dairymen have replaced it with more concentrate.

“In California, dairymen have been feeding other crops to try to ‘cheapen up’ the ration,” said Hoyt.

He noted that California dairy farm numbers continue to decline – from about 2,000 dairies in 2001 to about 1,400 in mid-2015. 

HAY EXPORTS

Certainly a much needed bright spot for the alfalfa hay market is exports from West Coast ports, including at Los Angeles-Long Beach and the Pacific Northwest at Seattle and Tacoma. Hoyt notes that California ports currently export about 25 percent more hay than PNW ports.

“Ten years ago it was the opposite,” Hoyt said.

He says the main reason for the California port tonnage increase are the higher numbers of containers coming back into Los Angeles and Long Beach from China, plus less expensive ocean container rates out of L.A.-Long Beach compared to Seattle-Tacoma.

Overall, alfalfa hay exports from all West Coast ports to China have climbed a staggering 21 percent. The hay market specialist said, “Long term, it looks like China will be a growing market.”

The second largest destination for West Coast-shipped alfalfa hay is Saudi Arabia (after China), including a late Summer 2016 buying surge from 5,000 metric tons in June to 31,000 metric tons in August.

“Overall, the Saudi Arabia market looks like it will be a growing market,” Hoyt said.

Why are the Saudis on a buying spree? Hoyt says smaller farms in the country are allowed to grow hay but larger operations and dairies must purchase alfalfa hay from other countries.

Turning to the United Arab Emirates, West Coast alfalfa hay exports to this area of western Asia have dropped in half since 2013 with no real growth expected in the short term, Hoyt’s contacts predict.

PERFECT STORM

Japan is viewed as a mature alfalfa hay market with little short-term growth potential. However, 2016 timothy grass hay exports to Japan from the Pacific Northwest jumped 17 percent from January through September.

Why? A perfect storm of conditions, according to Hoyt. Canada reduced its timothy hay shipments to Japan due to wet growing conditions, plus less Australian-grown oaten hay has is now shipped to Japan. Also, there is a 12 percent reduction in West Coast exports of Sudangrass to Japan, plus a typhoon in northern Japan wiped out locally-grown grass hays.

In conclusion, Hoyt says fewer alfalfa acres in the West are likely in 2017, yet few crop options could limit a reduction in acres in some areas of the West.

Acreage declines are expected in Arizona, Central California, and the California desert around Blythe as growers expect to plant more cotton in 2017, hoping for better profitability prospects with cotton over alfalfa.

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