Hay Prices Likely To Increase Even More This Fall
Short supplies of alfalfa hay have dramatically impacted prices for this product. The average national price for alfalfa hay in August was quoted at $201/ton but there is a significant range in prices depending on quality of product delivered.
September 6, 2012
As cow-calf producers prepare for the coming winter months, feed availability will likely remain a concern. Hay prices have increased sharply in the last two years following significant drought conditions in the Southern Plains (2011) and in the Midwest and Great Plains (2012). By far the most dramatic impact has been on the supply of alfalfa, a high-quality feed ingredient with superior levels of protein and energy (see chart). Alfalfa feed is critical for dairy producers, but many beef cow producers also have come to rely on it as part of a properly managed program.
In its August crop production report, USDA provided an early indication of the 2012 expected output for alfalfa hay and other hay. USDA currently forecasts U.S. alfalfa production at 54.9 million tons, 16% lower than a year ago and 20% lower than the five-year average. Production of other hay products (excluding alfalfa) is currently projected at 65.4 million tons, slightly below the 65.8 million tons produced last year but some 12% lower than the five-year average.
Short supplies of alfalfa hay have dramatically impacted prices for this product. The average national price for alfalfa hay in August was quoted at $201/ton but there is a significant range in prices depending on quality of product delivered.
Premium-quality product in California, for instance, a state with the largest number of dairy cows, is trading around $260/ton. The national average price for other hay was quoted in August at $140/ton, slightly below the all-time high of $146 established in May.
The lack of feed availability and the sharp increase in the price of other feed alternatives will tend to pressure cow-calf producers and dairy producers going into the winter months. While U.S. beef cow slaughter has been lower than some expected in July and August, we could see more cows come to market going into the fall. Seasonally this is to be expected and the fall cow run continues until late November. The short feed availability will likely further exacerbate the situation.
So far we have seen a notable increase in the number of dairy cows coming to market. With both corn and alfalfa prices at record levels, producers have had to cull swiftly. Also, keep in mind that while the U.S. beef cow inventory is down some 8% from 2007, the inventory of dairy cows is almost 1% higher than it was five years ago. The ratio of hay feed per dairy cow is dramatically smaller than it is for beef cows. Between July 1 and mid August, U.S. dairy cow slaughter (based on weekly numbers) is estimated at 395,290 head, 12% higher than the previous year. Beef cow slaughter during the same period was 445,069 head, 15% smaller than the previous year.
Overall, U.S. cow slaughter was 840,359 head, 4% smaller than last year. The liquidation in the dairy industry likely isn’t over, considering the significant mismatch between current milk prices, cattle inventories and feed availability. Beef cow producers also will face some difficult decisions come fall as probably even higher hay prices will be required to ration available supply.
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