USDA-NASS recently released the annual crop production report and December 1 Hay stocks data. The USDA's Livestock Monitor recently reported the following. "Increased hay production was reflected in the December 1 hay stocks, which increased 17% from the 2012 figure [76.5 million ton in 2012]. This large increase still however, is historically quite low for December; over 10 million tons shy of the 10 year average."
In comparison to 2012, the 2013 year on average was a better year for growing hay in most parts of the country. Even with the increased on farm hay stocks from a year ago, are hay supplies keeping up with demand? The answer to what the future hay inventories and prices will be going into 2014 and 2015 may be determined by the drought situation in California. I suspect that hay prices will not be as low as they are today for some time. I spent a brief time working in southern California, when I was there I was amazed in the amount of agricultural products (our food) that are grown in that part of our country.
What is astonishing to me is the number of dairies in that area, not to mention that a large portion of the dairy quality alfalfa is grown in that region. The latest drought monitor indicated 90% of California is in Severe to Extreme drought categories. Will California be sourcing much of their hay from other parts of the country? If the drought continues, prices may reach new highs. Good quality alfalfa in California is already at about $260 per ton delivered and alfalfa/grass mix hay is $300 per ton FOB. The average prices received for alfalfa in Montana in 2013 was $187 per ton. I hear reports of people selling hay out of the state for over $300 a ton today.
It wasn't that long ago when hay prices seemed stagnant at around $100 per ton. What other factors may contribute to strong hay prices in 2014? Beef prices are strong and will continue to be strong as herd inventories are still not growing, and drought in Mexico is reducing their herd sizes. If the drought continues to expand in California or pops up in another part of the country, beef prices will continue to be at record highs.
What effect will the blizzard that killed thousands of cattle in the Dakotas and surrounding states have on the markets? What is going to happen to corn acreage? With corn prices in 2012 going from about $7 per bushel down to $4 in 2013, will some corn acreage be replaced with new alfalfa plantings? While I don't claim to be an agricultural economist and try to predict agricultural prices and planted or harvested acreage, if I was still farming, I would seriously consider planting more hay acres this spring. If you are producing high quality hay, I suspect you won't have a problem finding a favorable market for it.