Are we heading for another bust and a double-dip recession? I hear some hay growers being swayed to grow corn (“At $200 for corn, I wouldn’t grow a stick of hay.”)
Last week, I talked with a hay grower who also does custom harvesting for grain corn. The average wait time to unload has been over four hours.
The warehouse is jammed and they are not accepting any new contracts for corn; nor are they allowing existing contract holders any more acreage for corn for next season. This sounds to me like there is more product than there is infrastructure to handle it. Does anyone else out there see this as a sign of a glut in supply?
Now, let’s talk about what’s going on in the hay industry; first, some hard questions. The dairy industry is still in a state of questionable recovery from one of the longest spells of low prices in recent memory.
My thoughts are that there will be a lasting recovery for milk prices when the rest of the economy heals. All those families still on unemployment are also consumers of dairy products.
Think about shopping for food. When everything is coming up roses, there is a good chance that cheese and ice cream regularly show up on your grocery list. When finances are tight, those items easily move from the “regular” to the “luxury” column of the grocery list.
As families move off the unemployment rolls and onto steady employment, there will be more ice cream sold. This will increase the volume of gross sales for the dairy industry, which will cut the surplus, which will steadily raise the prices, which will strengthen the local dairyman’s budget so he can pay more for hay and buy a year’s supply in advance, just like the good old days.
On the export side of the hay market, we heard of a massive shipment to the Middle East being cancelled while it was on ships halfway there. Researching what really happened, it turns out that the shipment involved was fescue straw.
There are limitations to the amount of fescue straw that can be fed without problems. Those receiving the fescue straw had not done their homework and experienced the problems. Once the issue was resolved, it was back to business as usual.
Speaking to the owner of one of the Pacific Northwest exporters, the feeling was that the export market is more diversified and reliable than it ever has been before. The export market as a whole is expanding. Middle East interests now have controlling interest in at least one major PNW (Pacific Northwest) export facility and one more in California, in addition to one de-hydrate export plant in Spain.
“This,” he stated, “shows great confidence in the product and weather in the western United States as a long-term source of forage for the needs of the Arabian peninsula.”
He went on to note that there were no plants purchased by Middle East interests in South America, Australia or Canada. The export hay industry is rapidly moving away from the “over-capacity” situation it has been in in years past. The traditional Pacific Rim countries (Japan and Taiwan) importing hay from the United States are now joined by Korea and China as major importers. This all adds up to a robust market for quality hay.
I asked him if he knew of anyone in the Eastern United States exporting hay. He said that there were a couple, one in Ohio and one in Pennsylvania, who were exporting limited amounts of hay to places like Puerto Rico and Bermuda. “Most of the soils and they weather in the East make large-scale exporting prohibitively difficult.” (As if it’s been a piece of cake in the West with last year’s rain every three days all through the haying season.)
I spoke with a grower in southwest Idaho a couple of weeks ago. We discussed the upset of the 2008 crop of hay, with the price going so high and then falling. His operation at Marsing, Idaho, includes growing hay on his own land, renting hay ground and putting up hay on a custom basis for local dairies. He volunteered the comment that massive price spikes are bad for the industry, since they always leave one leg of the industry weakened.
For the hay industry to be strong, everyone must be able to make some money. All of agriculture is tied to the rest of the world economy. Sometimes very loosely, and sometimes with an “around-the-corner” connection, but it is all tied together.
What will prices be? For export alfalfa, a couple of sources have voiced a “wild guess” of starting at $130 to $150 per ton. Maybe. Maybe diesel will stay where it’s at, too. Prices for corn and other commodities, including oil and forages, are volatile right now. While there are signs of the general economy making a recovery, hang on. It may still be a wild ride.
Just for reference, when I know the road I will be driving could turn into a wild ride, I do my best to be on it in a vehicle I know well. Professional hay and forage growers know that product and how to grow, package and market it and may be wise to stick to what they know best. FG
