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Forage Market Insights: Fourth-quarter push

Progressive Forage Editor Dave Natzke Published on 30 September 2019

Whether it’s harvest quantity or quality related to weather, slumping prices or uncertainty over trade and export markets, there are plenty of factors to play out for forage producers, marketers and buyers entering the final quarter of 2019. Here’s a brief look at conditions as the third quarter came to a close.

Drought areas move and expand, but it’s wet

Hay-producing areas impacted by drought grew as summer came to a close, based on the USDA’s weekly drought monitor. As of Sept. 24, about 16% of U.S. hay-producing acreage (Figure 1) was considered under a drought, a 10% jump from the previous month. Alfalfa-producing areas saw less drought impact, rising to 5%, just a 2% increase (Figure 2). Compared to a month earlier, dry areas shrunk or disappeared in the Pacific Northwest and North Dakota but expanded substantially in the Southeast and Mid-Atlantic states, as well as Arizona, New Mexico and Texas.

hay drought

 alfalfa drought

Outside of those areas, the challenge for many producers is the opposite. Fall moisture – in some cases, rain or snow at record-setting levels – have hampered a final cutting of alfalfa, with harvest delays taking a toll on quality.

Price slide extended

Alfalfa

The U.S. average alfalfa hay price fell another $4 per ton in August and is now down $25 per ton from May’s peak of $204. On a regional basis, sharpest month-to-month declines were in the East (Figure 3).

Alfalfa prices

Individual states exhibited more dramatic and diverging monthly price swings, based on the USDA data. Wisconsin saw the average price for alfalfa hay increase $25 per ton in August, while Pennsylvania’s average was down $44 per ton – yet the average price in both states was about $195 per ton.

Compared to a year earlier, alfalfa hay prices were up $58 per ton in Wisconsin and about $36 higher in Minnesota. In contrast, Arizona and Oklahoma saw alfalfa hay prices decline $30 and $43, respectively.

High monthly alfalfa hay prices were in New Mexico ($230) and Colorado ($225). Lows were in the Dakotas: $89 per ton in North Dakota and $100 per ton in South Dakota.

Other hay

The U.S. average price for other hay also continued to soften after hitting a five-year high in May. The August average of $127 per ton was down $9 from July and the lowest since June 2018. Price declines occurred in all four regions of the country (Figure 4).

hay prices

Among individual states, August average prices were down $26 per ton in Texas and $19 in Minnesota and Oklahoma. Only a handful of states saw small price increases, led by California, up $10 per ton from July.

Compared to a year earlier, August 2019 prices were up $35 and $43 in New York and Pennsylvania, respectively. Of the 27 reporting states, Texas and Idaho led decliners, down $25 and $30 per ton, respectively.

Highest average prices in August were in Colorado ($225 per ton), Arizona and Oregon (both $200). Prices averaged under $100 per ton in seven states, including Iowa, Texas, Nebraska, Oklahoma, Minnesota and North and South Dakota.

Dairy hay

August prices for Premium and Supreme hay in the top milk-producing states averaged $208 per ton, down just $1 from July (Table 1). August prices in Pennsylvania and Wisconsin bounced back after July’s declines.

dairy quality alfalfa prices

Organic hay prices

There were no new prices reported in the USDA’s organic hay report.

Politics is at center of export market

The USDA’s latest monthly hay export totals were released after Progressive Forage’s deadline, so check our website for an update. 

In early September, China said it would include alfalfa hay on a small list of U.S. products on which import tariffs would be reduced. That’s prompted some optimism and an increase in the number of inquiries for U.S. alfalfa hay, according to Christy Mastin, international sales manager with Eckenberg Farms Inc. of Mattawa, Washington. Nonetheless, given the political whipsaw, China remains an all-or-nothing market with little trade relationship security. The level of trust between China and the U.S. is not the same as the long-term relationships in Japan, she said.

If the China market does strengthen into 2020, there are concerns for exportable supplies of alfalfa hay, Mastin said. There’s still time to recover, but a wet fall in the Pacific Northwest is clouding the outlook for harvest of a fifth cutting of alfalfa.

Beyond alfalfa, the timothy export market remains slow. Large carryover inventories of lower quality timothy are pressuring prices lower, and buyers are purchasing small volumes as needed, waiting for even more price declines. Higher grades of timothy continue to draw demand.

A trade agreement between the U.S. and Japan, unveiled in late September, did not include hay on the list of products targeted for a phased-in reduction or elimination of import tariffs.

Regional markets

A summary of late September conditions and markets included:

Midwest: In Iowa, alfalfa prices were steady to slightly higher, with both hay and straw quality improving; grass quality was lower, and prices reflected that. The end of September and beginning of October looks like the return of the rainy season.

In Nebraska, demand was light to moderate in the central and eastern areas, with good demand in the western side of the state. Most reports indicate crops are a few weeks behind a normal year, but many are surprised how well crops have performed after the slow and late start.

In Kansas, hay trade was slow to moderate, demand was slow, and prices were mostly steady. Higher quality forages seemed to be holding their value.

In Missouri, hay supplies were moderate, demand was light, and prices were steady to weak. With good pasture conditions, the hay market activity was slow and likely to remain that way until there is some snow flying.

In South Dakota, alfalfa and grass hay sold mostly steady on limited sales. There was good demand for high-quality alfalfa hay, especially from out-of-state buyers. Demand was only moderate for the plentiful supply of lower quality hay.

In Wisconsin, prices remain strong for quality hay. Quality hay supplies remain tight with a good supply of lower quality hay.

In southwest Minnesota, prices were steady, with light demand and a limited supply.

Southwest: In Oklahoma, alfalfa and hay trade was limited due to the volatility of cattle prices, rain and availability. Many producers were continuing to battle weeds and work around thunderstorms.

In Texas, trade activity was moderate to good with a large variety of hay on the market. Quality variation was also wide. The Panhandle received much-needed rain that turned pastures green, but livestock owners are in the market for hay. Coastal bermuda producers received rain, so they should get another cutting – if armyworms don’t get to it first.

In New Mexico, alfalfa hay trade was limited on moderate demand. Most regions were working on fifth cuttings, with heavy rains reported in some areas.

In California, trade activity was light to moderate on moderate demand. All hay acres for 2019 were estimated at 52.77 million acres; alfalfa acres were estimated at 16.83 million acres.

Northwest: In Idaho, rain over the trade area slowed marketing. Very little high-testing alfalfa is available in eastern Idaho. Demand remains good, especially from exporters.

In Colorado, hay trade activity and demand were light to moderate. Hay producers in the higher elevations were in the thick of third cutting; elsewhere, fourth cutting was about 30% completed, and corn silage harvest was underway across the state. Statewide, stored feed supplies were rated 3% short, 82% adequate and 15% surplus. Dry conditions were increasing in western Colorado.

In Oregon, prices trended generally steady; retail/stable type hay remained the most demanded hay. Rain delayed movement across the growing areas. In the Washington-Oregon Columbia Basin, export buyers remained aggressive, and local dairies weren’t willing to compete with exporters. Demand remains moderate to good on alfalfa; most fourth cutting isn’t testing for dairy quality.

In Montana, demand for hay was mostly light to moderate with most large sales moving into neighboring western states. An historic early season snowstorm hit western Montana as September ended. Many producers in central and western Montana are still cutting their second cutting as they saw limited heat units causing hay to grow slow and mature late. Late season rains have range and pastures all greened up, which continues to limit demand for hay.

In Wyoming, demand was moderate to good from local buyers with very good demand from out-of-state buyers. Producers were taking their last cuttings of the year. A mid-September video action featured mostly good quality second- and third-cutting alfalfa consigned from eastern Wyoming and the Nebraska Panhandle. Higher testing hay was quite hard to come by, and dairies are having to buy lower testing alfalfa to fill their needs.

East: In Pennsylvania, hay sold with a weaker undertone. Demand was light with very limited buyer interest on hay that was not of premium quality. Straw sold firm on a light test and very good demand.

In Alabama, hay prices were steady on moderate supplies and demand.

Dairy outlook

With August USDA data released, monthly year-over-year milk production growth has now been under 1% for 11 consecutive months. However, there are signs the decline in cow numbers may be slowing or ending.

The USDA revised the preliminary July cow numbers higher, indicating there were 10,000 more cows in the 24 major dairy states and U.S. than earlier reported. With July’s revisions, August U.S. dairy cow numbers declined just 2,000 head from the previous month, to 9.318 million head. Among the 24 major dairy states, August 2019 cow numbers were down 1,000 from July.

Ten states increased cow numbers compared to August 2018, with the largest jumps in Texas (+25,000 head), Idaho (+15,000) and Colorado (+9,000). Largest declines were in Pennsylvania (-34,000) and Arizona (-13,000). Illinois, Wisconsin, Ohio, Indiana and Virginia were each down 7,000 to 9,000 head, with California down 6,000 head from the year before.

The news of slow growth in August milk production was overshadowed by extreme cheese price volatility in September, according to Mark Stephenson, director of dairy policy analysis, and Bob Cropp, dairy economics professor emeritus, with the University of Wisconsin – Madison. With those wide swings, where will milk and cheese prices be when the dust settles?

Combined with the trend toward weaker milk production growth, holiday buying demand should support cheese prices, Cropp said. With a smaller supply of replacement heifers, he doesn’t see cow numbers coming up dramatically, and questionable forage quality will also keep a lid on production per cow.

Short of some major global economic storm, both Cropp and Stephenson are skeptical of current Class III milk prices softening into the $16s for the first half of 2020. Cropp sees Class III prices settling in the high $17s or $18s after the holidays, but both Cropp and Stephenson said $19-per-cwt prices should be sustainable, and both forecast that 2020 prices will be higher than 2019.

Figures and charts

Progressive Forage tracks regional hay price trends using average monthly prices reported for selected states by the USDA’s National Agricultural Statistics

Service (NASS). The USDA report does not provide hay quality classes in its price reports. By region, states included:

  • Southwest – Arizona, California, Nevada, New Mexico, Oklahoma, Texas
  • East – Kentucky, New York, Ohio, Pennsylvania
  • Northwest – Colorado, Idaho, Montana, Oregon, Utah, Washington, Wyoming
  • Midwest – Illinois, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, South Dakota, Wisconsin  end mark
Dave Natzke
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