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Northwest: 2018 should provide some profits

Published on 10 January 2018

Northwest alfalfa and timothy producers should remain slightly profitable in 2018, according to the latest Northwest Farm Credit Services’ Hay Market Snapshot report. Exports favor strong alfalfa sales, but low dairy profitability will provide sturdy headwinds.

Domestic conditions

In the Washington-Oregon Columbia Basin, the wet spring delayed planting for many crops, which in turn delayed fall timothy planting. High timothy prices and low winter wheat prices drove many to plant more timothy last fall as part of rotations in the Columbia Basin. Alfalfa acres are down in the face of a bleak dairy outlook and only slightly profitable returns in 2018.

In the Oregon-California Klamath Basin, limited supplies of dairy-quality hay were produced in 2017 due to untimely rain showers. While winter has been mild, most beef cattle operations are currently feeding hay.

In Idaho, reports suggest limited supplies of high-quality dairy hay. Dairies have adequate supplies of hay and will have little appetite to buy hay until milk prices improve. Reports indicate a large supply of feeder hay in Idaho. Most producers are covering their haystacks and will wait for marketing opportunities.

Drought conditions in eastern Montana led to active culling among beef cows, curbing demand. In addition, the winter’s mild start led to very little hay fed until mid-December.

Export opportunities

Saudi Arabia – in the midst of implementing a plan to restrict domestic hay production in an effort to reduce water consumption – continues to be the fastest-growing export destination for U.S. alfalfa. The USDA Foreign Agricultural Service estimates Saudi Arabia will need a total of 1.2 million metric tons of alfalfa per year once their production has ceased.

Nearly all hay exported from the U.S. to Saudi Arabia is shipped through the port of Los Angeles/Long Beach. Less than 1 percent of the total volume is traded through Northwest ports, according to the U.S. Census Bureau.

In contrast, in 2017, about 30 percent of alfalfa exported from the U.S. to China moved through Seattle/Tacoma ports. China is the second-fastest-growing U.S. export destination, although exports to China slowed in the second half of 2017.

Transportation and trucking challenges

Hay transportation south into California has become more difficult in the face of a new California fuel tax and new electronic logbook (ELB) requirements. Effective Nov. 1, the California diesel fuel tax increased from 16 cents per gallon to 36 cents per gallon. In December, the Federal Motor Carrier Safety Administration entered the third phase of the ELB implementation process, requiring all trucks manufactured after 2000 to use ELBs. In addition, a general supply shortage of trucks is affecting many industries across the Northwest. Replacements of older trucks, trucker retirements and hurricane disaster relief in the South are driving the shortage.  end mark

—Summarized by staff from Northwest Farm Credit Services’ Hay Market Snapshot

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