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What does the 2021 hay market look like?

Jason Bradley for Progressive Forage Published on 31 May 2021

In economics, the simplest you can get is supply and demand. These two items will just about determine a price for any commodity. The hay market is no different. Both the supply and demand side have their own factors that influence them.

The major factor influencing the supply of hay is the weather. For the demand side, it’s the cattle inventory.

Supply

Nothing plays more into the supply of grass and hay than rainfall. At the time of this writing, the drought monitor shows much of the western half of the country in some kind of drought condition. The drought outlook in Figure 1 doesn’t look too much better, with that same part of the country likely holding or developing further into drought.

Drought outlook

So what does this mean for hay producers? This decrease in supply will pull the price of hay up. As we move through spring, it will be important to keep an eye on how this plays out. Should the drought hold, this could be the major factor influencing the rest of the year.

Demand

The other half of what sets the price for hay is the demand. Cattle are the primary consumers of hay in this country, and the demand for hay by cattle is based on the number of cattle out in the country.

Before we look at what the total cattle inventory looked like on Jan. 1 in Figure 2, we need to look at where we are in the cattle cycle.

Total cattle inventory

Every 10 to 12 years, the number of cattle in the country fluctuates. As cattle prices rise, more cattle are held, increasing the number. As this increase saturates the market, prices will balance themselves out and start to drop. This leads to more cattle being sold off, bringing the inventory down, resulting in less supply and then pushing the price back up. Thus, a cycle.

Because of the life span and time it takes to develop and finish cattle, this cycle is around 10 to 12 years. That leads us to where we are today. Based on the USDA-NASS reports, we’re on the downward side of our cycle. The total cattle inventory chart shows that around 2019, we peaked with our numbers and have begun a decrease in the inventory.

While the decline did level off during the 2020 year, this can be attributed to the oddity of 2020 and the bump in demand for beef due to the lockdowns and people cooking at home. In the next few years, history shows that the inventory will continue to decline. Until the price rebounds, cattle inventory will hold down the demand for hay, pulling the price for hay down with it.

The ‘other’ factors

Other feedstuffs could also affect the price of hay this year. Should the price of other items like corn or soybeans become competitive, this could cause another shift in the demand for hay. If beef producers are able to find ways to feed their cattle cheaper with alternatives to hay, they will.

Bottom line

So what’s all this telling us? Watch the weather.

For the beef producer, it may be advantageous to have any hay you might need on hand now should the weather dry up even more. This will get you your hay before prices go up with a major increase in demand.

For the hay producer, look at the longtime contracts you have and make sure you’ll be able to meet the needs should drought happen or persist in your area. If you’re in an area not being affected by drought, it may be an opportunity to look into marketing in those areas that are.  end mark

Jason Bradley
  • Jason Bradley

  • Agricultural Economics Consultant
  • Noble Research Institute
  • Email Jason Bradley

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