June 30, 2022

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Executive Summary

Drivers for the hay industry include favorable export prices, lower inventories and weather. 

  • Hay export prices start at $270 per ton for the new alfalfa crop, and elevated prices are likely to remain. 
  • Weather conditions delayed first hay cuttings in most of the Northwest by at least two weeks. 
  • May 1 on-farm inventories for the Northwest fell by 510,000 tons of hay year over year. 

12-Month Profitability Outlook

Hay_Alfalfa-Timothy Q4 21

 

Northwest FCS’ 12-month outlook for the hay industry suggests profitable returns. A cool spring and intermittent rains have damaged some of the hay crops in Idaho and Washington.  Smaller hay production, lower inventories and high feed prices will support favorable prices for hay growers.   

Northwest Situation

Weather delays in first cutting and lower hay inventories support elevated hay prices. On average, Northwest hay prices are $100 higher per ton than in 2021, averaging over $300 per ton for fair quality or better alfalfa. Elevated prices in the Northwest are likely to stay for the rest of 2022. Some producers with quality irrigated crop land switched from growing alfalfa or forage crops to different crops. Some quality irrigated crop acres that were used for hay transitioned to wheat and small grains acres so producers could capitalize on higher price ceilings and lower input costs. On-farm hay stocks fell from 1.89 million tons on May 1, 2021, to 1.38 million tons on May 1, 2022 (27% annual decline). First cuttings across the Northwest have been delayed due to sporadic rains or drought conditions. The combination of fewer hay acres, lower on-farm stocks and delays in new crop first cuttings will support higher hay prices into 2022. 

Northwest All Alfalfa Price
Northwest All Alfalfa Price Line Graph
Source: USDA Agricultural Marketing Service, Compiled by Northwest Farm Credit Services.

In Idaho, wet weather delayed first cutting and the crop was lighter than it is in a normal growing year. Much of the uncontracted first cuttings went to haylage due to rain damage. Yields for first cutting were down and triticale yields fell 8.3% year over year. When crop plans were developed in the spring, many producers in Idaho were concerned about irrigation availability. In turn, many decided against planting corn for silage and planted wheat acres, which require less water and uses less fertilizer. Prices for feeder hay are starting at $300 per ton, $325-$350 per ton for dairy quality, and $60-$72 per ton for haylage, nearly double the cost compared to average hay prices. A decrease in hay acres coupled with low hay inventories and high feed prices will maintain heightened hay prices in Idaho.

In Montana, a cool, dry spring has left 44% of Montana in moderate drought for the second consecutive year. Weather across the state has been less than ideal for forage growth, with 43% of Montana pastures in poor or very poor condition, more than double the acres in 2020. Many pastures aren’t ready for cattle to be turned out as of Mid-June and producers in these areas are supplementing forage with hay, furthering increasing the demand for limited supplies. Optimism for the growing season and hay price varies by region and drought conditions. Rainfall in Mid-June eased drought concerns and improved hay conditions in eastern and southern Montana, decreasing the new crop hay price for these regions. In drought-stricken regions like northern and central Montana, producers are at least one to two weeks out from first cuttings with hay prices starting at $225 per ton. Producers in areas of drought will be impacted the most, and those who grow hay to feed their own cattle will be faced with the difficult decision to buy expensive hay (to make up for production shortfalls) or liquidating parts of their herd.

In Washington, dairy and export quality hay is trading at over $100 per ton higher than a year ago, but exportable alfalfa is difficult to come by due to intermittent rains. Normally, producers would have started second cutting for alfalfa by the end of June. However, below-average temperatures and frequent storms have delayed first cutting with hay growers finishing their first cuttings in late June. Hay prices are higher than last year across the board. Export quality new crop was trading at $325-$330, up $105 from last year. New crop alfalfa in fair condition is starting at $270 per ton, up 58%. 

U.S. Drought Monitor
U.S. Drought Monitor Comparison Chart
Source: U.S. Drought Monitor. June 30, 2022. 

Cattle

Rising feed costs have placed mounting pressure on cattle producers’ profitability and are shifting hay demand for cattle. Producers who rely on purchasing hay and feedlots that buy grains face the greatest headwinds. Feeder cattle sales prices have risen, steers weighing 550 to 600 lbs. are being sold in the $2.00-$2.20 per lbs. price range and price increases are expected to persist. The current national average feeder steer price is projected to increase 22% higher by 2023. Yet, producers may still find that higher feeder cattle prices aren’t enough to cover increases in feed and operating expenses. With strong hay prices likely to remain for the rest of 2022, some cattle producers that do not grow hay many further liquidate herds. Smaller cattle herds can shift demand reducing local hay needs. Higher hay prices encourage cattle producers to grow their own feed (as opposed to buying). 

Exports

Demand for Northwest hay exports in a normal year will soften in the spring, but demand has remained robust this year. Export costs have accelerated, impacted by higher trucking and freight costs. Ocean freight costs have increased due to rising fuel prices, and producers are paying more to guarantee their hay and straw will be shipped. With limited shipping options, it’s no longer a decision around which shipping option is the most economical, instead producers need to pay more to ensure that their hay is getting shipped in a timely manner. 

Alfalfa exports have been strong in 2022 with sizable exports gains in the first four months to Asia. China increased alfalfa exports by 113,640 tons since 2020, up 32.8%. The U.S. was able to capture a larger portion of the Chinese market after ongoing hay disputes between China and Australia caused China to look for new trade partners. Seasonal alfalfa and grass exports to the Middle East declined by 73,733 metric tons compared to 2021. Overall, U.S. alfalfa shipments were stable year over year. Following strong 2021 growth, Grass exports fell by 25,745 metric tons, but are 3% higher than pre-pandemic exports. 

U.S. Alfalfa Exports (January-April)
U.S. Alfalfa Exports (January-April) 2022 Chart
Source: U.S. Census Bureau. June 7, 2022.

U.S. Grass Exports (January-April)
U.S. Grass Exports (January-April) 2022 Chart
Source: U.S. Census Bureau. June 7, 2022.

Alfalfa Guidelines for Domestic Livestock Use and Not More Than 10% Grass
Alfalfa Guidelines for Domestic Livestock Use Chart
*Relative Feed Value calculated using the Wisconsin/Minnesota formula. **Total Digestible Nutrients calculated using the Western formula. Quantitative factors are approximate; many factors can affect feeding value. Values are based on 100% dry matter. Guidelines are to be used with visual appearance and intent of sale (usage).
Source: USDA Agricultural Marketing Service.


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Additional Information

Northwest FCS Business Management Center
www.northwestfcs.com/Resources/IndustryInsights

Hay & Forage Grower
www.hayandforage.com

USDA Livestock and Grain Market News
https://www.ams.usda.gov/market-news

Progressive Forage
www.progressiveforage.com

USDA Hay Reports
https://www.ams.usda.gov/market-news/hay-reports

Australian Fodder Industry Association
https://www.afia.org.au/

The Hoyt Report
http://thehoytreport.com

Learn More

For more information or to share your thoughts and opinions, contact the Business Management Center at 866.552.9193 or bmc@northwestfcs.com.

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