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Western hay market outlook for 2018

Progressive Forage Editor Lynn Jaynes Published on 01 December 2017

Seth Hoyt, Western hay market analyst, said the bottom line for the 2018 hay market projection is that “export buyers could be more of a driver in the alfalfa hay market in the West in 2018 than dairy buyers – similar to the 2017 season.”

Hoyt spoke to attendees at the Western Alfalfa and Forage Symposium in Reno, Nevada, on Nov. 30.

Hoyt said many Western dairies did not buy big volumes of alfalfa hay in 2017 because of the cost-price squeeze. Milk prices weren’t positive and many dairies were waiting for hay prices to come down. Since milk price projections for 2018 are not promising, dairies will still be forced to do all they can to hold down feed costs.

On the export side, however, Hoyt said exporters believe sales of alfalfa hay to China and Saudi Arabia will continue to grow, although China still demands non-GMO hay. The domestic price question depends on whether inventories will be so low that central California dairies will compete with export buyers on early alfalfa hay in the Southern Desert in early 2018.

California’s agriculture continues to see a rise in production of almonds, pistachios and other tree nuts, and California hay acres compete with these crops. Some dairy producers have begun to diversify and even join the movement, investing in almond, pistachio and walnut tree acres themselves to offset the milk check losses. While carryover of higher quality alfalfa hay will be down, low milk prices could hurt dairy demand of early market 2018 hay, Hoyt said.

Whether alfalfa hay prices go higher or lower than that, Hoyt said, will depend on the quality of the first cutting, milk prices and dairy demand, and export demand, particularly for early high-quality alfalfa hay.

In other Western states, Hoyt reported his seed representative contacts indicated timothy hay acres in Washington would be higher in 2018, but there wasn’t a consensus on whether alfalfa hay acres would increase or decrease. While seed representatives felt hay acres in Idaho would decline, a lack of alternative crops to plant with profit potential might temper a decline in alfalfa hay acres, as with many other states in the West.

With milk prices being a low spot in the Western hay market, Bill Matthews with the University of California – Davis Ag Issues Center told symposium attendees China and Saudi Arabia are potential growth areas for exports that could favorably offset the market. Increased hay demand by China is linked to an expanding market and increased demand for dairy products within the country.

Since 2000, Matthews said, the growing economy of China has led to greater wealth per capita. From 2000 to 2016, per capita GDP in China increased almost 290 percent. As individual wealth increased, so has the demand for improved diets that include greater consumption of animal protein, including dairy products.

“If we think of hay as liquid milk,” Matthews said, “then we have to be concerned about milk exports, as well. Remember, we can export hay directly or export hay in the form of milk or processed milk. Both increase the demand for Western forage.”

Alan Hallman with the USDA Foreign Ag Service serving in Riyadh, Saudi Arabia, joined the conference via remote internet connection and explained more about the demand from Saudi Arabia, where the monarchy system changes “oil into milk.” Hallman said the Saudi government takes money from oil sales and uses it to subsidize animal feeds, such as alfalfa hay at $59 per metric ton, corn at $82 per metric ton and dried distillers grain solubles at $99 per metric ton. Economic stresses with crude oil futures prices led to a budget deficit in 2016 and subsequently subsidies were cut, opening the markets for U.S. export. However, Hallman said, avoiding supply and price disruptions will be the key to success when working with the Saudi buyers. U.S. exports of ag products into Saudi Arabia in 2017 are currently projected at $1.7 billion.  end mark

Lynn Jaynes
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