Hay Market

[farmers_son]

Just posting this for interest. The Texas monthly hay report for July:

Full text see:
http://search.ams.usda.gov/mndms/2011/07/AM_GR31020110729.TXT

AM_GR310
Amarillo, TX Fri Jul 29, 2011 USDA-TX Dept of Ag Market News

Weekly Texas Hay Report

Compared to last week: Hay prices firm. Trade moderate to active under good Buyer demand. Hay buyers are forced to fill hay needs in a drought stricken State. Thus, most hay buyers are forced to go out of their normal marketing areas or out of state to find hay supplies. Some areas of the state received minimal amounts of rain although not enough to end drought. The extreme heat continues to dry out any light amounts of rainfall. Fire burn bans are still in effect in most areas of the state. Livestock auctions in the state continue to run more than normal livestock receipts as ranchers and farmers are forced to cull or sell-off herds due to high costs feeds and diminishing stock tank water.

Prices for hay and pellets quoted per ton except where noted.

The state of Texas Department of Agriculture has the Hay and Grazing Hot Line set up for buyers and sellers; the number is 1-877-429-1998. The web site for TDA is www.tda.state.tx.us.

End of paste.

The report goes on to quote hay prices in the range of 100-250 per ton depending upon location. The lower priced quotes would not be fancy hay.

Check out the Texas Hay Hotline at:
http://www.agr.state.tx.us/agr/program_render/0,1987,1848_5410_0_0,00.html?channelId=5410

I see quotes there for round bales as high as $150 per bale. One quote $340 (I assume that was per ton).
The drought is described as the worst in Texas history which is saying something.

[grassfarmer]

"Hay prices appear to substantially higher in the U.S. most of the time. There must be a reason and it is more than freight."

Related to land values perhaps?

[smcgrath76]

A couple of points/questions...
Hay is not hay. Is the US market
demanding higher quality hay for some
purpose or are we talking beef cattle
hay?
Are the cowherd economics different, or
is the hay heading to different end
points?
Hay may end up in shortfall and the
price will go up, and then people will
put hay into production...how is that
any different than any commodity
including the cattle cycle? If the
timing works out that hay is low when
cattle are high, that is just a bonus
for one of the players in the
marketplace. I agree that a lot of hay
ground is being turned under, but a lot
of cows are still hitting the hook as
well.

[ASRG]

Hay should be considered as just another crop. It needs to compete with wheat and canola.
I have a fairly close neighbor who is a large commercial hay producer. His target is for Asian export, followed by US export to the race tracks, then domestic horse supply, and finally the Alberta cow trade. In the first three markets he makes money.....in the cow trade it is little more than salvage value.
And yet how many cattle farms produce hay for their own use and put a value on it that may be realistic, or may be totally unrealistic? If (and this is a big if) my hay is worth $175/ton, should I be feeding it to cows? If I can grow wheat and canola that net me a much larger return than hay wouldn't that be the thing to do?
Hay at $60/ton...is that sustainable when compared to a cereal/oilseed rotation? I don't think so.

[kato]

$175 a tonne works out to $95.45 for a 1200 pound round bale. We have a 30 acre field of alfalfa/brome that produced 207 round bales on the first cut, and looks like it will be running around 85 bales on second cut (10 acres left to go, and already have 60 bales). This means that if one could actually get such a price, and that's a big if, this field would have made $27,968, or $932.00 per acre. The only cash expense would be twine and fuel. There's a pretty good cushion to pay for that. We don't fertilize, just spread manure, and the stand is at least 12 years old, so the seed was paid off a long time ago.

As bad as the crops in this province are, that's how good the hay has been. If you didn't get so much rain last spring that it drowned out, it's been a spectacular year for hay. And all baled with no rain either!

Now, could someone please give me the name of whoever would pay $175.00 a tonne for hay??????

[greybeard]

Hay here returns about $100 to $120 an acre, If it yields 4 bales they will be worth about $25, 3 bales then it's $35 and if everyone is only getting one bale they will be $100.
Trucking is $5 a mile now for hay. That's almost $20 bale per 100 miles.
But if grain is 10 cents a pound, does that make good second cut bales at $75 ea cheap feed?

[ASRG]

It can be a balancing act trying to winter feed at an economical level.
In 2009 it was very dry in my area and hay was priced anywhere from 6 cents for junk up to 10 cents for good stuff.
It didn't make much sense to keep cows when the winter feed bill would probably exceed the price of the next years calf.
I bought fairly good barley for $3.60/bu at the bin and baled up all my straw. Cut a few rough old sloughs, oil leases etc. Fed the barley whole...just augered into the tractor bucket and dribbled it onto the straw.
Fed 7 lbs. barley/5 lb. slough hay/ all the straw they wanted.
I think they wintered very well, very fat and sassy in the spring. I figured it cost under $1/day/cow.

[smcgrath76]

You struck it greybeard...
Trucking is $5 a mile now for hay. That
puts a real cap on the price of hay in a
lot of cases.

[farmers_son]

I am not buying freight as the answer. Yes if hauling hay was cheaper the spread in hay price between Alberta/Saskatchewan and the U.S. would arbitrage much quicker but the price should have arbitraged by now in any event.

And on a long haul, super B load hay freight costs can be less than $2 a mile.

But freight aside, if hay in the U.S. is $100 a ton and hay in Alberta is $60 ton or perhaps less, given that Alberta and Saskatchewan are a major cattle feeding region within North America, then two things should have happened to arbitrage the hay price.
One is the cow herd in Alberta and Saskatchewan should be increasing rapidly given the cost advantage we would have since winter feeding is a major cost whether you are in Alberta or Montana, Wyoming, North Dakota. The second thing that should have happened is forage acres rapidly decrease until the price of hay rises to be price similar with the U.S. market. Or a combination of the two.

Now where this discussion becomes relevant is the decision many of us are facing regarding breaking grass acres to seed to grain. At the present price of hay in Alberta the acres should be broke. But at $100 a ton for hay maybe not. I mentioned on Agriville a few weeks back that hay priced on a feed value comparison should be $90 a ton if barley is $3.75 a bushel. I do not think there is any argument that the price of hay has stayed pretty much the same (other than drought related price flucuations) while barley and especially canola have gone up in price, by a lot.

I think it is reasonable to suggest the price of hay is about to go up. And even though some of us might choke on the price I am suggesting $90 to $100 a ton (based on the U.S. price) is what hay will be worth, if not this winter then by next winter. If I am right, (and once in a while I am) then forage acres might still be an attractive cropping choice going forward.

And frankly, at the calf prices we are looking at for this fall, $100 a ton hay would not be out of reason.

[grassfarmer]

You are an analyist farmers_son and I tend to be a bit that way too - working out where we think the price of calves will/should be, where the price of feed/pasture will/should be and thinking that the "industry" will move that way. Problem I see is an awful lot of people in agriculture don't think very much at all about these things. Many run the same number of cows regardless of current economics, same with the hay they make to sell and the proportion of land they seed to grain. Maybe it's not a problem at all, lots of producers seem to get by fine doing what they've always done and many of the older ones prefer a balance of enterprises to spread risk. For lots of older guys hay is a fairly easy thing to do too - much easier than managing a grain crop with the high input costs and timely management decisions that needs to manage risk and turn a profit. Most guys can sit in a tractor and cut and bale a crop of hay once a year. I might be wrong but that is why I think the industry doesn't jump about from all cows to all grain to all hay as prices would indicate.
I think the most obvious divide is between those who bought land at recent values and those that bought land when it was $10k a quarter. Some of the guys that bought it way back when think selling bales at $30 a time is mostly profit - lands paid for, machinery is paid for only, put no value on their time. They are in a different boat to the guy with a bank loan on $2000/acre land.