Hay and alfalfa prices spike

Oct 14, 2011

The recent USDA World Agricultural Supply and Demand Estimates report came out last week, with one key cattle feed supply missing—hay. The drought in Texas, Oklahoma and surrounding states has left the hay supply and demand chart lopsided.

Hay is becoming an increasingly sensitive topic for producers looking at their profit/loss margins. According to a Chicago Mercantile Exchange (CME) report, 2011 should have been a herd rebuilding year for U.S. cow/calf producers, but instead, it has been the year of liquidation.

Hay, or the price and lack of it, is a sensitive topic for cow/calf operators as they prepare for the winter months.

The latest data from the USDA crop progress report shows that 96 percent of pastures and ranges in Texas are currently in a poor or very poor state and 93 percent of pastures in Oklahoma are also rated in a similar condition. With fall here and winter around the corner, hay and winter wheat grazing are becoming a supply demand nightmare for producers.

Hay statistics from National Agricultural Statistics Service (NASS) reports shows hay in the U.S. reached a nominal all-time high level in August of $172 per ton.

The drought has forced producers to increasingly rely on hay to fill their needs, but that is turning into a very expensive proposition as hay values spiked in August and September. Alfalfa prices in September were quoted at $196/ton, 67 percent higher than the same month a year ago, while prices for all other hay were quoted at $128/ ton, 34 percent over last year’s levels, according to CME.

The lowest prices in August, according to NASS, were in the northern Plains. North Dakota and Montana have had a good growing season and still

have the lowest prices. The rest of the north-central states mainly have prices from $100-150 per ton. Drought conditions have pushed the prices higher in the southern Plains. The state with the highest price is New Mexico at $253 per ton.

“Many producers in the southern Plains saw the writing on the wall and accelerated their cow marketings as soon as it was viable to do so, without waiting for the normal start of the fall cow run,” according to CME. Cow slaughter rose sharply in September and cow slaughter plants ran full Saturday schedules. Cow slaughter has tempered somewhat in recent days but the spike in hay prices and limited winter wheat grazing will further limit feed availability going into the winter.

In addition, according to the Livestock Marketing Information Center in a March 2011 newsletter, hay exports have increased. In 2010, hay exports were 2.6 percent of annual production, which is an increase from 1.2 percent in 1994.

Hay stocks on Dec. 1, 2010, were reported at 102.1 million tons, 5 percent less than the previous year. CME estimates that hay stocks on Dec. 1, 2011, could decline another 9 percent from the previous year to 93 million tons. The situation may be even worse if winter wheat plantings continue to struggle. Winter wheat plantings in Texas through Oct. 2 were at 25 percent, compared to 49 percent for the five-year average. Oklahoma is at 30 percent on their winter wheat plantings, compared to 49 percent for the five-year average.

Limited hay supplies and grazing opportunities will maintain the pressure on cow/calf producers in the southern Plains, potentially forcing more liquidation of beef cow herds, according to analysts. — Traci Eatherton, WLJ Editor