Water supply concern may slow alfalfa gains in Western states

Alfalfa growers may follow the normal tendency to plant more alfalfa hay acres after 2004's profitable year, but uncertainty about water supplies may keep acres in the Western states stable for 2005. A revitalized dairy industry and water for irrigation are two leading factors affecting the alfalfa hay market, said economist Seth Hoyt who addressed the 450 attendees of the National Alfalfa Symposium held last month in San Diego.

Bearish alfalfa hay prices in 2003 and irrigation water uncertainties were cited by Hoyt as responsible for this year's 3 percent decline in alfalfa hay acres and production in the seven western states. Lower milk production in the second half of 2003 and early 2004, coupled with improved consumer demand for dairy products and expanding cow numbers in California and Idaho “made for the perfect storm of factors that were bullish to milk and alfalfa hay prices in 2004,” Hoyt said. “Supply-demand dynamics with dairy products created what appears to be the biggest year to year upward swing in milk prices in the history of the dairy industry.” This “revitalization of the dairy industry in the West in 2004” is a boon to alfalfa growers who have struggled through two disappointing years.

Irrigation concern

However, concern over the lack of irrigation water in 2005 is having a big impact in central and southern California, said Hoyt, who is senior agricultural economist for the California Agricultural Statistics Service in Sacramento. Central California, particularly the central and southern San Joaquin Valley, has become the leading alfalfa hay production area in California, surpassing the southern desert. Hoyt said, “Some growers in this area have indicated they will not expand alfalfa acres until the outlook for irrigation water improves.” (Hoyt's comments were made before a series of winter storms rolled through the state in late December and early January, depositing heavy rain and more importantly heavy snow in the mountains.)

“It appears that if alfalfa acres are higher in California in 2005, it will be due to above normal spring planting and higher fall planting in a few areas where the water outlook is more favorable,” he said.

Alfalfa hay acres could go up in the Stockton Delta area due to losses in processed tomatoes this year. Acres could also go up “slightly” in the Sacramento Valley. Hoyt does not expect much conversion of cotton to alfalfa hay in the central valley this next year. “With uncertainty of irrigation water supplies along with the three year commitment with alfalfa hay, many growers in California may stay with cotton and use the government loan program if cotton markets remain depressed,” Hoyt said.

Imperial Valley hay

Growers in the Imperial Valley increased planting of alfalfa hay this fall. In mid-November, those acres totaled 137,000.

One development could boost alfalfa acres, Hoyt said. In the Palo Verde Valley, 24,000 acres of farmland was to be dried down in the water deal between the Palo Verde Irrigation District and Metropolitan Water District. That dry down has been delayed into the first half of 2005. Hoyt estimates that all but 4,000 of those acres are in alfalfa hay, which growers will be able to get three to four cuttings from before the acres go out of production.

Hoyt predicts positive pricing for premium and supreme alfalfa hay in many western states in 2005. Tight carryover supplies of high quality alfalfa hay combined with the possibility of limited increases in production, expanding dairy cow numbers and a return to more normal alfalfa hay exports in the Pacific Northwest could increase prices. Prices on other qualities of alfalfa hay in the West may be mixed in 2005, he said.

Tight supplies of alfalfa hay this fall “could bode well for growers on early cuttings of alfalfa hay in 2005,” Hoyt said. Some dairy hay buyers were not able to fill their needs for hay going into winter due to tight supplies.

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