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Hay Market Insights: 2018 hay acreage bouncing back

Progressive Forage Editor Dave Natzke Published on 02 July 2018

Reacting to higher hay prices – fueled by diminishing stocks and strong export demand – U.S. hay growers intend to harvest dry hay from more acreage in 2018, according to the USDA’s Acreage report, released June 29.

Producers intend to harvest 55.1 million acres of all dry hay in 2018, up about 1.3 million acres (2 percent) from 2017. If realized, this will represent the highest total hay harvested area since 2014.

The acreage estimate contrasts USDA’s Prospective Plantings report, released in late March, which indicated 2018 dry hay acreage would fall to 53.7 million acres, down 58,000 acres (1 percent) from 2017 and the second-lowest total U.S. hay harvested area since 1908, behind only 2016.

Alfalfa hay acreage driving increase

The increase in overall hay acreage is primarily due to a 788,000-acre (5 percent) increase in alfalfa and alfalfa mixture hay compared to 2017. Most of that increase is driven by producers in the Northern Plains: Montana and South Dakota alfalfa and alfalfa mixture hay acreage is up 200,000 acres each, with North Dakota up 150,000 acres and Idaho up 110,000 acres. Iowa also boosted area harvested by 110,000 acres.

Those increases more than offset declines in about a dozen states, including Arizona, California, New Mexico, Oregon, Washington, New York, Pennsylvania, Kansas and Oklahoma. Record lows for all hay harvested area are expected in California, Illinois, Maine, New Hampshire and Rhode Island in 2018.

The new data reflects a continuation of declining hay acreage in California, where more than 1 million acres devoted to alfalfa and alfalfa mixture hay was routine for decades. Annual declines over the past 10 years, however, have pushed California’s alfalfa hay acreage to a record-low 650,000 acres in 2018.

Other hay acreage also higher

Acreage for all other hay (excluding alfalfa) is up 496,000 acres (1 percent). Missouri area devoted to other hay is up 500,000 acres, followed by New York, up 140,000 acres. Kentucky, North Dakota, Oklahoma, Tennessee and Texas are each expected to boost acreage by 100,000 acres. Those increases offset declines of 300,000 acres in South Dakota and 100,000 acres in Kansas and Virginia.

Factors pushing production

The reversal in the U.S. hay acreage outlook compared to three months ago has been driven by hay prices, inventories and exports.

Alfalfa hay prices have been on the rise, with the May 2018 U.S. average alfalfa hay price the highest since October 2014. Hay inventories stored on U.S. farms as of May 1 were the second-lowest total for that date in the past decade. U.S. exports of alfalfa hay hit a record 2.66 million metric tons in 2017. At 1.53 million metric tons, exports of other hay were the highest in three years.

Still dry in the Southwest

The USDA’s World Agricultural Outlook Board reported little change in overall drought conditions. About 23 percent of U.S. hay-producing acreage was located in areas experiencing drought as of June 26 (Figure 1); about 20 percent of alfalfa hay acreage was in the same condition (Figure 2).

U.S. hay areas experiencing drought conditions

U.S. alfalfa hay areas experiencing drought

Pasture and range conditions followed similar geographic lines. As of July 1, about half of U.S. pasture and rangeland were rated in good to excellent condition, with 20 percent rated poor or very poor.

Hay prices

The latest available USDA monthly Ag Prices report summarized May 2018 prices.

Alfalfa

Despite weakening slightly in the East, Midwest and Northwest, stronger prices in the Southwest continued to push the national average alfalfa hay price higher (Figure 3).

average alfalfa hay price

At $189 per ton, the May 2018 U.S. average price was up $6 from April and $32 more than May 2017, the highest since October 2014.

Compared to a month earlier, May average alfalfa hay prices jumped $30 per ton in New Mexico, but were $40 lower in Michigan.

The largest year-over-year increases were in Oklahoma ($72 per ton), Minnesota ($57 per ton), New Mexico ($55 per ton) and Wisconsin ($51 per ton). Indiana, Missouri and Pennsylvania posted small declines from the year before, with New York’s average down $60 per ton.

Other hay

May 2018 regional average prices for other hay were lower in the East and Midwest, steady in the Northwest and up slightly in the Southwest (Figure 4). The U.S. average was estimated at $122 per ton, down $2 from April and $5 less than May 2017.

average "other hay" prices

Among individual states, Kansas, Oklahoma and Washington saw the largest price increases from April, up $10 to $20 per ton. Eight states (Oregon, Virginia, South Dakota, Wisconsin, Michigan, Ohio, Minnesota and Pennsylvania) saw averages drop $10 to $20 per ton.

Price changes from a year earlier were again more notable. May 2018 prices for other hay were up $30 to $50 per ton in seven states, led by Iowa. In contrast, Pennsylvania and New York saw declines of $32 and $97 per ton, respectively.

Figures and charts

The prices and information in Figure 3 (alfalfa hay market trends) and Figure 4 (“other hay” market trends) are provided by NASS and reflect general price trends and movements. Hay quality, however, was not provided in the NASS reports. For purposes of this report, states that provided data to NASS were divided into the following regions:

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

Regional auction and market summaries

Here’s a peek at late June auction market conditions and summaries:

East: Alabama hay prices were fully steady, with moderate supply and demand.

In Pennsylvania’s Lancaster area, market information on alfalfa and alfalfa-grass blended hay was limited on a light test. Grass hay sold mostly steady. Straw traded mostly steady on a light test. At New Holland, Pennsylvania, a steady to weak undertone was noted in prices, albeit on limited sales. Grass and alfalfa-grass blended hay sold mostly steady to $20 lower, with most movement in small bales. Demand was heavily dependent on quality, with several “no sales” recorded.

Southwest: All classes of California hay traded steady with very good demand.

In Oklahoma, alfalfa trade was slow on good demand and light offerings. Prices were fully steady in the very limited trade. Much needed rain moved into the state and brought most haying activities to a standstill. Growers expressed optimism about improved yields on future cuttings following the rains.

In Texas, all classes of hay traded $5 to $10 higher. Movement was moderate as supply remains low and demand high. Most of the state was extremely dry, causing the supply of hay to continue to decline. The Panhandle is hoping for rain as producers have planted hay grazer to bale for late summer hay. The only part of the state that reported a significant amount of rainfall was the south, as the remnants of a tropical storm dumped several inches of rain.

In New Mexico, alfalfa hay prices were steady on active trading and good demand. Southern and southwestern areas were 50 to 90 percent into the third cutting; the southeastern region was 20 to 50 percent into the third cutting; and north central areas were between the second and third cutting.

In Utah, hay prices were mostly firm, with trading slow. A majority of movement was on previous contracts. Demand for lower quality hay was light, with good supplies.

Northwest: In Idaho, new-crop alfalfa prices were firm, on active trading and good demand, especially for non-rained-on dairy hay for immediate shipment. Most dairies are paying $1 per point of relative feed value. Exporters are having a difficult time finding high-end hay.

In Oregon, prices trended generally steady. Retail/stable type hay remained the most demanded hay. Most hay growers have cut 2018 hay and a few are selling. Recent rains in the growing areas have slowed sales; those who haven't baled are waiting for hay in the field to dry, and those who have baled now have rain-damaged hay.

In the Washington-Oregon Columbia Basin, new-crop export and domestic alfalfa and timothy prices were firm. Trade was active with very good demand for all classes and grades. Most exporters were waiting to see if the escalating trade war would mean higher tariffs beginning July 6.

In Wyoming, prices were steady on a thin test. Some producers are finished with first cutting, while many in the western side of the state were just getting started. A Valley Video internet timed hay auction on June 28 saw prices steady to $5 lower, with instances of $10 lower. Demand was very good for first-cutting alfalfa. Consigned hay was from eastern Wyoming and Nebraska, with most of the sales southbound into Colorado, Kansas and Texas.

In Montana, prices were fully steady on light sales; some producers were selling hay straight out of the field. Rain has stopped most producers from finishing the first cutting or from starting in the first place. Many stands in eastern Montana were starting to look very mature. New-crop contracts continue to come in, with prices steady. Colorado buyers continue to pick up Montana hay on contract for late summer and early fall delivery.

In Colorado, demand was good for small squares of grass hay; trade activity and demand were moderate on alfalfa hay.

Midwest: In Iowa, hay was in short supply as weather kept hay growers away from fields. While rain was welcomed in southern Iowa, continued rain in central and northeast Iowa kept producers grounded. Cooler weather spurred hay growth after several weeks of unusually high temperatures. Small squares were extremely hard to find. Similar prices were being paid for old-crop and new-crop hay, as quality was lacking in the 2018 new crop.

In Missouri, although short-term conditions might have improved just a little, over 70 percent of the state is now listed on the latest drought monitor. Hay supplies were light, with demand good and prices steady to firm.

Across south central and southwest Kansas, demand was very good for all hay types due to concerns of the availability of hay later in the feeding season. Yields for both alfalfa and grass hay were being reported as below average. Prices for all hay types were mostly steady to firm. Dairy alfalfa was $5 higher in most areas.

In Nebraska, alfalfa sold steady on a thin test. Ground and delivered forages and dehydrated pellets sold steady. Demand was moderate to good. Most of the state received rain showers, with some areas in the northeastern part of the state getting 14 to 17 inches of rain, resulting in a lot of crop and flood damage. Some cattlemen have been cutting pastures and baling grass hay where yearling cattle have not been keeping up with the large amounts of grass.

In South Dakota, demand was moderate at best, as end users were only seeking to buy feed as they need it. First-cutting quality was lower than expected, and many buyers are waiting for the second cutting. Widespread rainfall has resulted in less-than-ideal drying conditions.

In southwest Minnesota, little dairy quality hay was available, and prices reflect the quality of hay available.

In Wisconsin, some areas are beginning the second cutting. Overall, there are concerns about the hay supply, as yields on some older stands were reduced in the first crop. There is an adequate supply, but the majority is not dairy quality.

Dairy margins tight

Other factors impacting forage producers as we move into July include:

Dairy outlook: With alfalfa hay, corn and soybean meal prices all moving higher, U.S. dairy farmers saw May 2018 income-over-feed-cost margins remain low. Total feed costs were at a four-year high. It means dairy farmers who enrolled in the Margin Protection Program for Dairy (MPP-Dairy) and elected $7, $7.50 or $8 per hundredweight (cwt) margin coverage were guaranteed indemnity payments for a fourth consecutive month. As the program is structured, however, larger dairies see substantially less benefit.

Compounding the problem of low milk prices, escalating tariff wars with two major U.S. dairy customers – Mexico and China – threaten dairy exports and have negatively impacted cash and futures prices.

Beef outlook: June 1 cattle feedlot inventories were up 4 percent compared to a year earlier, the highest inventory for that date since the USDA began tracking inventories in 1996. May 2018 placements into feedlots were slightly higher than May 2017. May cattle marketings were up 5 percent. With the mounting trade wars, corn prices are being pressured lower, which should boost demand for feeder cattle and lead to heavier carcass weights.

Exports: May U.S. hay export totals were announced after the Progressive Forage Extra’s deadline.  end mark

Dave Natzke
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