Will hay prices fall in 2013?

2012-12-06T08:00:00Z Will hay prices fall in 2013? Agri-View
December 06, 2012 8:00 am

Everyone who buys or sells hay knows that hay prices dramatically changed in 2012. Most reports say hay is selling for two to five times more than it did in 2011. The question often asked of Michigan State University Extension educators is, “if normal weather patterns return in 2013, will the price of hay fall?” The drought of 2012 was the big factor creating a shortage of hay and getting most of the blame for current prices. However, declining hay acres are another reason there is less hay for sale.

As we plan for 2013, hay buyers and sellers are wondering whether hay prices will decrease, or if the current price stay will where it is and become the new normal. Hay prices are influenced by three supply factors: yield, acreage and unsold hay stockpiles.

According to the U.S. Department of Agriculture, the drought of 2012 reduced alfalfa, alfalfa-grass mixture, and other hay yields by 3 percent to 28 percent across the Midwest. These yield losses varied widely according to soil types, age of the hay stand, soil fertility and rainfall.

Nationally, according to the USDA, if we look back over the last two years, the total hay acres decreased by 3.8 percent or 2.3 million acres. Much of this land was converted to corn and soybean acres because these crops were more profitable than hay. In Michigan hay acres decreased 3.6 percent over the same period, dropping the acreage down to 1.1 million in 2012. In Michigan, 68 percent of the hay acres are alfalfa or alfalfa-grass mix. With considerably more acreage and higher yield potential per acre than other hay types, the alfalfa acres are critical for maintaining future hay supplies in Michigan, but alfalfa acres have been declining faster than other hay types, falling at a rate of 5.7 percent over the last two years.

Stockpiles of unsold hay from the previous season vary from year to year. When available, stockpiles can provide some carryover to help reduce large price swings in a poor crop year. Unfortunately, the reduction in national hay acres and a series of regional droughts has reduced this stockpile in the country, contributing to greater volatility of hay prices.

Hay supply and prices for 2013 will be highly dependent on next year’s weather conditions. The loss of hay fields to grain crops will also have an impact on hay supply across the country in 2013. We can only anticipate that the loss of hay acres will be from 2 to 3 percent – similar to the past few years. The greater unknown is how many new acres of alfalfa or other hay crops were seeded at the end of the 2012 growing season or will be seeded in 2013. These higher hay prices are starting to attract some acres back into hay production.

As a 30-year veteran of hay marketing in Michigan, I estimate that if normal weather returns in 2013, and average yields are achieved across Michigan, the state’s hay supply will still be 7 to 10 percent short at the end of the summer compared to the supply of hay there was in Michigan two years ago. It will take yields that are close to 0.4 ton per acre better than the state average of 3.2 ton per acre to get levels back to 2010 hay supply numbers. It will be difficult to increase hay supplies and see significant reductions in hay prices in normal growing years if we continue to lose total hay acres.

The greater possibility of hay prices falling could be brought about by decreasing demand. If hay prices remain high, buyers may search out alternative feeds or liquidate more of their hay-consuming animals in 2013 and this could lead to hay price reductions.

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