Hay Supplies Tight, Prices To Stay High

22 Jan Hay Supplies Tight, Prices To Stay High

Hay stocks are “incredibly low,” says ag economist

Rick Mooney, Hay & Forage Grower, January 22, 2013

Expect hay supplies to stay on the tight side and prices to remain high through the months ahead based on reports of year-end hay stocks and 2012 production from USDA.

“If I were a livestock producer and didn’t have my feed needs locked in, I’d be pretty nervous right now,” says Matt Diersen, ag economist with South Dakota State University Extension.

In its Dec. 1 hay stocks report issued earlier this month, USDA estimated there were 76.5 million tons of hay stored on U.S. farms, down 16% from the year-earlier stocks level. Stocks are “incredibly low” and at their lowest levels since 1957, Diersen says.

A major shortfall in total hay production in 2012, due mostly to widespread drought, played a role in the low stocks number. For 2012, USDA puts the production of all hay in the U.S. at 120 million tons, down 9% from that of the year before and the lowest U.S. production level since 1964. Alfalfa production last year, at 52 million tons, was down 20% compared to that of the previous year and the lowest it’s been since 1953.

Also playing a role: Commercial disappearance of hay between May 1 and Dec. 1 was 64.7 million tons. “That’s well above what we normally see for that period relative to the small supply level,” says Diersen.

The big question looking forward, he says, is how much hay will be fed between now and May 1, when USDA releases its next stocks report. Last year, commercial disappearance for the Dec. 1-May 1 period was 69 million tons. “And that was incredibly low from a historical perspective. If we match that this year, we’re looking at ending stocks below 7 million tons. Typically, we have closer to 20 million tons. Those stocks have to get you from May 1 until the new crop comes in.”

For buyers and sellers, that means alfalfa– and grass-hay prices are likely to remain at their currently high levels in most parts of the country for the foreseeable future. “For any kind of downward pressure on price, we’d have to see a massive herd liquidation of beef or dairy herds. And there’s no indication at this point that anything like that is about to happen.”

That doesn’t mean prices are likely to “go crazy high” in the months ahead, Diersen says. “But there’s certainly more room for some price increases rather than price decreases.”