Hay Rush of 2011: Drought and flooding places increased pressure on hay prices everywhere
In 1848, gold was discovered in California, marking a significant time in U.S. history as optimistic Americans headed West in search for riches. In 2011, a similar frenzy might take place, as drought marks the smallest hay crop in a century. The shortage of this commodity has many ranchers wondering if there will be enough to feed cattle this winter.
According to USDA reports, the price of alfalfa surged 51 percent in the past year, reaching a record $186 per ton in May. Hay and grass make up about half of what cattle eat over their lifetimes. Parched pastures force ranchers to find alternative sources of feed, pushing some spot-market corn to the highest ever.
Compounding the problem is the Texas drought, markedly the worst in the state’s history. USDA predicts that the U.S. may harvest 57.605 million acres of hay in 2011, the lowest on record since 1909. As the drought worsens and feed prices rise, many ranchers are prompted to reduce their cattle herds. It’s a growing storm that will provide opportunity for those who can weather it.
Justin Fruechte, forage specialist for Millborn Seeds in Brookings, SD, offered his perspective on how Midwest ranchers might take advantage of a good haying season and profit in the months to come.
“In South Dakota and Minnesota, the quality and tonnage of the hay crop is looking great,” Fruechte says. “There is going to be a lot of opportunity to market hay this year. The option is there for ranchers to ship hay south, and they need to take advantage of that if they have available supplies to sell. I predict record hay prices.”
The question still remains, will there be a shortage of hay for cattle this winter?
“South Dakota cattle producers have always been good at storing hay and having an abundance of it around,” Fruechte notes. “On-farm storage is available, and we have had plenty of grass this summer. With fewer cow numbers in the region, a lot of pasture hasn’t been in use, so many went ahead and hayed it. For the guys who don’t put up their own hay, they can certainly expect to pay the extra dollar for it.”
Fruechte explains that a lot of ranchers took advantage of drowned-out areas of land or ground that had received hail damage, where cash crops wouldn’t thrive, and planted millet or sorghum instead. This will provide additional forage in the winter months for cattlemen.
“We have seen many ranchers plant cover crops immediately after their oats were harvested,” Fruechte says. “Since we have had ample moisture, many decided to double-crop and are sitting in a comfortable spot for forage supply.”
He offered some advice for those with extra hay on hand.
“I really encourage guys to sit down and put the pencil to it,” he advises. “If you can market your hay, at $50 per ton above market price, you might want to take advantage of that, especially if you know you’re going to have good forage supply for next year. Don’t sit on the hay and wait for it to go bad. The mentality is you have to prepare for the drought and keep some on hand, but if you think you have enough to get through the bad winter, market where you can right now and buy poorer quality hay back. It’s been good to see how producers have taken advantage of the drowned-out acres and made them into a crop. Where land prices and input costs are, you have to maximize the land.”
Matt Diersen is an agricultural economist at South Dakota State University (SDSU) and commented on the latest USDA crop report, which was released in mid-August. According to USDA numbers, U.S. production of alfalfa and alfalfa mixtures are expected to total 65 million tons in 2011, down 4 percent from the previous year; however, the 2011 expected yield of 3.36 tons per acre would be the second highest since 2005, but it’s still down 0.04 tons from 2010. USDA forecasts 19.3 million acres harvested, down 3 percent from the previous year.
“Stocks are tight, and acres are down across the board,” Diersen says. “So what that means is a tighter supply and less hay to go around. Nationally, there is an increase of demand for hay given the dry conditions of the drought in the Southern Plains. As a result, this sent a lot of cattle to market early. This will drive the price of hay way up. The high prices we’re seeing will remain under a lot of pressure in the upcoming months.”
So, what does this mean for ranchers needing to feed hay?
“Ask yourself, what’s my situation?” challenges Diersen. “With other feedstuffs going up, can I increase my own consumption of hay? If you have enough to put on the market, great – it’s needed elsewhere. What do you price it at? That’s a tough guess. The higher the quality, the more you can ask. It doesn’t do you any good to let hay rot in a pile if you can sell it earlier and get top dollar for it. The market is bidding up the price to get those stockpiles that are needed moved into the system.”
Looking at cattle markets, Diersen shared some predictions.
“Southern operations will continue to disperse,” he says. “From my view, for the Northern cattlemen, if you can delay selling your feeders, it could be to your advantage. I wouldn’t want to be selling my calves in the September market if I didn’t have to. Add some pounds onto that calf, and it will probably pay off. The cost of feed in the Northern Plains is still less than in the South. There will be continued pressure on the cow market, which is holding up surprisingly. Don’t rush selling opens or culls. Just hang onto the cattle and put some finish condition on them. Assuming you have some pressure on price, you can be looking at a very high price again for everything, from cull cows to heavier feeders.”
editor’s note: for tech-savvy readers, conversations on the hay markets occur each week on twitter. aug. 10 marked the first forage conversation of haytalk chat (#haytalk), which is held weekly on wednesdays at 8 p.m. (est). the one hour weekly session is a new social network experience aimed at farmers, ranchers, livestock owners and businesses in the hay and forage industry. discussion points include grazing techniques, storage, equipment, feed quality, noxious weeds, forage types, regional challenges, upcoming workshops, and livestock questions. check out #haytalk on twitter.com to join the conversation.
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