BURLEY • Market conditions should be better for both hay growers and dairy producers in 2014, but how good will depend on the weather and if dairies expand.
While most of the nation is expected to have fairly normal weather during the 2014 growing season which should return alfalfa yields to near long-term averages, the West — particularly California — is a wild card.
With water supplies critically short, California dairies are looking for out-of-state sources for hay and beef producers are looking to move cattle to greener pastures.
Some analysts expect 100,000 head of beef cattle to move to Texas or Montana for feed.
Nationwide, alfalfa prices are expected to be around $150 per ton this year. Idaho hay normally runs about 30 percent above that national average, which would be about $195 per ton. But many wouldn’t be surprised to see good quality hay go for as much as $300 per ton this year.
Competition from California dairies is just one concern. Exporters who usually source hay from California may also be in Idaho to buy hay.
And then there’s the water outlook.
Although the outlook for irrigators who rely on the Snake River for their water is looking wetter by the day with the snowpack 136 percent of the Feb. 28 median, many other hay growing regions are still facing shortages.
Salmon Falls Basin is at just 71 percent and the Big Wood is 75 percent of the median snowpack for the end of February. If water supplies are tight, both hay and corn production will be limited in those areas.
According to the U.S. Department of Agriculture’s hay stocks report, hay stocks in December were 17 percent higher than the previous year but are still 14 percent below the 10-year average.
Idaho had 2.35 million tons of hay on hand Dec. 1, up 12 percent from the previous year. California, Washington and Oregon were all equal to 2012 at 1.9, 1.2 and 1.7 million tons,
Drought will likely limit hay acres in the West, while competition from corn and beans will again be stiff in the Midwest. Still alfalfa acres are expected to be up 2.5 percent nationwide.
“(Hay) price hikes will likely be a West phenomenon,” said Katelyn McCullock, a dairy and forage economist at the Livestock Marketing Information Center (LMIC) in Denver, Colo. She spoke at the annual Hay and Forage Conference.
Dairy Outlook Strong
Strong dairy and beef prices will help southern Idaho livestock producers mitigate higher hay prices, at least in the first half of the year.
Dairy producers are receiving about $23 a hundredweight for milk now with break-even costs in the $17.50 to $17.75 range, thanks largely to cheaper corn. But if hay prices do shoot up to $300 per ton, break-even costs will quickly go back to $18 per hundredweight or higher. Corn is expected to average around $4.20 per bushel nationally this year, with new crop 5 to 10 cents lower.
That seems to be impacting business decisions that dairies are making. Even though springer heifers are selling for around $2,200 per head at the Jerome Livestock Auction, dairy producers aren’t getting excited about expanding their herds.
Rick Naerebout, a dairy business consultant in Twin Falls, hears dairymen talking about increasing silage piles this year rather than adding cows to the herd.
“They seem to be looking for places where they’ve had risk in the past to try to mitigate that risk,” he said.
That’s a different approach than in the past when strong milk prices would entice producers to ramp up production. But many are still paying off debt incurred in 2008 when milk prices crashed and feed costs soared.
Stable production coupled with soaring global demand for dairy proteins began pushing milk prices up in late 2013, a trend that is expected to continue through at least this summer. Dairy exports rose 40 percent last year to top $5 billion last year, well above the $2 billion mark set right before the market tanked in 2008.
LMIC is forecasting a nationwide average Class III milk price of $18.50 to $19.50 per hundredweight and an all-milk price of $19 to $20 per hundredweight. Those prices may or not soften by $2 to $4 in the second half of the year, McCullock said.
A change of just 1 percent in the nation’s milk production is enough to move milk prices, she said. With 41 percent of the nation’s milk produced in the West where the drought is lingering and the summer forecast is hot and dry, production may not increase as much as analysts expect and extend strong prices into fall. The futures market has Class III prices above $19 through September 2014.
“I think dairy will have a good year in terms of profitability,” McCullock said. “The best in five years.”