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2015 forage trends and prognostication

Robin Newell Published on 27 February 2015

Hay and forage supply is improved over the 2011-2013 time frame, when regional droughts and Upper Midwest winter survival affected forage supplies. With current increased forage supplies, the price of hay has declined somewhat from the highs of the past few years, but not as much as one might expect given the decline in the commodity groups of grain and grain byproducts.

On the demand side, declines in the other commodities that compete or substitute (to some degree) for hay and silage in beef and dairy rations can serve to moderate hay and forage demand. You might expect hay usage to increase when hay price goes down, but perhaps not as much as expected when competing feed commodities decline in price too.

Harvested alfalfa acres change from 2005 through 2014

Lower hay pricing and increased availability is good for the beef industry, and declining feed prices in general are a factor in rebuilding herd numbers. This bodes well for increasing domestic demand for all hay in the intermediate and longer term.

On the export side, demand for high-quality hay is historically strong, but hay exports seem to have taken a haircut over past months with the longshoreman slowdown at Western ports. Chinese focus on adventitious presence of GMO is an added speed-bump for exporters.

Look for hay exports to continue strong again when the longshoremen and the ports come to terms. As for adventitious presence of GMO in export hay to China, the fact is that China needs high-quality hay for their national goal to increase dairy production.

Expect continued buying of U.S. hay, albeit with more rigorous testing for adventitious presence. The cost may be initially borne by those in the hay export supply chain, but ultimately, in a free market, the buyer pays the added cost for their demands.

Demand for “dairy-quality” hay usually holds up well, although obviously the price can fluctuate with supply. Dairies are coming off a solid run of elevated milk prices, with improved cash flows versus a few years ago.

That high milk price probably helped maintain the price of high-quality hay overall as markets emerged from drought-induced shortages of 2011-2013. Now, the prospect of moderating milk prices, along with improved hay supply overall, may lighten the price a bit for dairy-quality hay, if not the demand per se.

Despite the rise in overall corn silage production over the past couple of decades, hay still accounts for the majority of forage dry matter consumed by cattle in the U.S. While silage can be bought and sold, it is not efficient to transport over long distances because of its relatively high moisture content on a dry matter basis.

Farms that are short on silage can adjust rations to substitute more hay and other feed commodities that can be more efficiently transported than silage. Thus, hay markets can be a proxy for the overall supply-demand picture in forages.

While corn silage is bought and sold, the vast majority occurs through private transactions between individual growers in proximity to dairies and feeders who store and feed silage on-farm. On-farm or in-field pricing for corn silage often discounts the value of the forage fraction, as grain harvest is the alternative to silage harvest for most corn growers except under extreme drought conditions.

This can give purchased corn silage an advantage over purchased hay in a least-cost ration formulation. It is one of the reasons behind the long-term trend toward increased corn silage use, somewhat driven by dairy herd size expansion and the need to purchase forages.

The situation for farms that grow their own forages may differ due to agronomic management decisions such as rotation and crop input costs, manure management choices and so forth.

Since the enactment of the Renewable Fuels Standard created under the Energy Policy Act of 2005, the price of corn grain and U.S. acreage devoted to it has been on the rise. Over a similar time frame, U.S. alfalfa acres declined, especially in states where growers converted hay acres to corn. Take a look at the accompanying U.S. map to see the change over time for harvested acres of alfalfa hay and haylage.

Newly seeded alfalfa acres in the U.S. hit a low point in 2011, according to USDA-NASS. You might expect acres in new alfalfa seedings to make a rebound given that average grain commodity prices are now lower than the average of the past decade. However, there hasn’t been much recovery, with newly seeded alfalfa acres static at 2.5 million acres per year in both 2013 and 2014.

Newly seeded alfalfa acres

Will newly seeded alfalfa acres and total alfalfa acres go back to the higher levels of the late ’90s? Probably not, since there have been structural changes in the supply and demand of hay and competing commodities since those earlier times.

An uptick in 2015 newly seeded alfalfa acres might be expected if hay prices hold relatively more stable than declining grain commodity prices. If an uptick in newly seeded alfalfa acres materializes, it could partially reverse the downtrends in harvested alfalfa acres within states most affected during the past decade.  FG

Robin Newell
  • Robin Newell
  • Vice President of North America Sales
  • S&W Seed Company