Read this article this morning and was wondering if it mirrored your thoughts on acreage reduction.
Higher early 2011 Western alfalfa hay prices than year ago
- Higher early 2011 Western alfalfa hay prices than year ago
- Export outlook
- Respected California market analyst Seth Hoyt predicts higher 2011 California new crop alfalfa hay prices compared to a year earlier.
- Hoyt predicts new crop supreme hay could fetch $200 to $220/ton range delivered to Tulare, California’s top dairy production area.
- Hoyt foresees 3 percent to 5 percent alfalfa acreage reduction in California this year, down to about 900,000 acres statewide.
- Western-state alfalfa acreage reduction of 5 percent to 10 percent is possible.
The prediction is slightly lower than December 2010 prices but higher than early 2010 new crop prices, noted Hoyt, the kickoff speaker at the California Alfalfa and Forage Symposium in Visalia, Calif. held in December.
Initial softer prices for new crop hay would be a belated Christmas gift for dairymen who face fluid milk prices at or below production costs.
Hoyt, author of the newsletter The Hoyt Report and a retired hay market statistician with the National Agricultural Statistics Service (NASS) in Sacramento, Calif., predicts Imperial Valley new crop supreme hay prices in the $160/ton to $170/ ton FOB range, with Central Valley supreme hay fetching $180/ton to $200 ton FOB.
Hoyt’s crystal ball predicts a 3 percent to 5 percent alfalfa acreage reduction in California this year, down to about 900,000 acres statewide. For the Western states overall, a 5 percent to 10 percent alfalfa acreage reduction is likely, Hoyt says.
The drop in California acreage in the Central and Northern valleys would be partially offset by unchanged alfalfa acreage in the Imperial Valley plus increased plantings in the Palo Verde Valley. Roundup Ready alfalfa, if available in the spring, could temper the acreage decline, depending on the yet-to-be finalized planting restrictions.
In 2009 and 2010, alfalfa hay production in Western states fell 3 percent, according to NASS data. The decrease included a 9 percent production drop in California. Arizona posted a 12 percent increase. Nationwide, alfalfa production increased less than 1 percent.
During the same time frame, U.S. alfalfa acreage fell 2 percent while Western states posted under a 1-percent reduction. California hay acreage fell 5 percent while Arizona acreage jumped 7 percent.
During the two-year span, yields fell 4 percent in California yet nudged 5 percent higher in Arizona.
Hoyt also expects fewer planted corn silage acres in California, but stronger silage prices this year. Corn silage, along with alfalfa hay, are key ingredients in quality dairy rations. Corn silage was planted on 500,000-plus acres in California in 2008. Hoyt predicts 2011 silage plantings in the 300,000 to 315,000 acre range.
Hoyt noted, “The bottom line is as long as the money situation at dairies is questionable then growers will be very gun-shy of growing corn silage and increasing alfalfa acres.”
Dairy driven
Hoyt predicts softer milk prices in the first half of 2011 in the $13 to $14/hundredweight range. The cost of milk production in California in the third quarter of 2010 teetered at the upper $13 hundredweight level, according to data from the dairy marketing branch of the California Department of Food and Agriculture (CDFA).
“As a result we’re looking at continued tight money in the dairy industry,” Hoyt explained.
In the fourth quarter of 2008, California milk production costs averaged more than $17/hundredweight and have steadily declined since, CDFA reports.
California is the nation’s top dairy state with about 1.75 million cows as of last October, down 20,000 cows from a year earlier due in part to the global economic recession.
Seventy-five to 80 percent of California-grown alfalfa hay is fed to dairy cows; compared to about 65 percent for the entire West region. The bottom line is the dairy industry, in good and bad times, commands the steering wheel on the alfalfa bus.
California first
An important California alfalfa hay milestone was achieved last year as California knocked off the Pacific Northwest region as the top West Coast baled hay exporter. Hay bales exported from California ports last fall totaled about 180,000 short tons, compared to about 140,000 short tons for Washington and Oregon.
“The main reason is ocean freight rates out of Long Beach and other California ports are more competitive than Washington and Oregon ports,” Hoyt explained.
This price scenario may continue in the long run. The Long Beach port is the top hay export location in California.
