Hay Market

[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.

[smcgrath76]

FS - long term I think you are right. I
don't think we will see a rapid cowherd
expansion anytime soon.
The other monkey wrench in logical
thinking is demographics. The aging farm
population is also going to drive a lot of
land into rental agreements and grain.

[kato]

Land at $2000 an acre makes it a whole different story. Can you even make a living growing grain on land that costs that much? It's more than twice the cost of most Manitoba land, and I don't see a lot of extra money floating around here now, let alone with land prices like that.

The cost of switching to grain is not cheap either. If someone wasn't already growing some grain, and had to buy the equipment needed, I don't think it would be worth the switch no matter what the grain price was... unless they were very young and had lots of time to pay off the startup expenses. It would be like starting farming right from scratch. In our situation, buying a combine, seeder, and all the stuff that goes along with it just isn't viable at our ages. What machinery we've got is paid for, and we like it that way.

We don't sell hay, except the occasional bale to a local horse person. If the hay crop is extra good, then more feeders go in the yard and we use it up ourselves. We'd rather turn the extra hay into increased cattle income.

[T.N.T.]

We will never see the cow herd expand to what it once was in canada.Reason being a lot of farmers just prefer to sit in a air conditioned cab during spring and fall,and then head south for the winter.That way they don't have to do anymore work then necassary.

[farmers_son]

Ah, the life of the grain farmer...

The USDA Feed Outlook is out this morning.

http://usda.mannlib.cornell.edu/usda/current/FDS/FDS-08-15-2011.pdf

A good discussion and worth reading.

In particular to hay:
"U.S. Hay Production Slips in 2011/12
All U.S. hay production in 2011/12 is forecast at 132.0 million tons, down 13.6
million from 2010/11 due to extremely hot and dry weather. The all-hay yield is
expected to be 2.29 tons per acre, down from 2.43 tons per acre in 2010/11.
Harvested acres are forecast at 57.6 million acres, down 2.3 million from last year
and the lowest all hay area on record going back to 1919.
Alfalfa hay production is forecast at 65.0 million tons, down 4 percent from last
year. Based on August 1 crop conditions, yields are expected to average 3.36 tons
per acre, down 0.04 tons from last year. If realized, this will be the second highest
yield since 2005. Harvested area is forecast at 19.3 million acres, unchanged from
June but down 3 percent from the previous year’s acreage.

Other hay production is forecast at 67.0 million tons, down 14 percent from last
year. Based on August 1 conditions, yields are expected to average 1.75 tons per
acre, down 0.2 tons from last year. If realized, this will be the lowest U.S. yield
since 1988. Harvested area, forecast at 38.3 million acres, is unchanged from June
but down 4 percent from last year.
Roughage-consuming animal units (RCAUs) in 2011/12 are estimated to be down
from 2010/11. Even with lower RCAUs, the sharp drop in hay production leaves
hay supply per RCAU down at 1.94 tons, compared with 2.10 tons in 2009/10.
9
Feed Outlook/FDS-11h/August 23, 2011
Economic Research Service, USDA
With tighter hay supplies, prices have risen sharply in recent months. The
preliminary July 2011 estimate for the average price received by farmers for all hay
was $170 per ton, compared with $112 per ton in July 2010. The preliminary July
estimate for alfalfa hay was $189 per ton, compared with $117 per ton last season.
The preliminary July estimate for hay other than alfalfa and alfalfa mixtures was
$119 per ton, compared with $97 per ton a year ago."

[kato]

This will certainly accelerate the downsizing of the beef herd. I would think that the only ones paying those kind of prices are feeding dairy cows or horses. The beef cattle will be dependent on whatever can be grown on the same farms they live on, I would think.

Ethanol subsidies reach far and wide, don't they?

[smcgrath76]

kato, long term I would be more concerned
with some of the biomass > energy schemes
that are coming along.
One of the advantages of cows over
pigs/chickens is that they can use DDGs,
and roughage. With this biomass (eg:
straw) for energy movement, it could make
beef cattle operations a lot more costly,
particularly in places that have winter.

[kato]

True. They should be forced to use poplar trees. That would be a win win situation, especially around here. The darn things grow like weeds! And I think they're planning to take over the world.

[ASRG]

I think the bottom line is hay has to be profitable for the grower but it also has to be profitable for the guy feeding it? Once upon a time people grew barley, not because it was profitable on it's own, but because it was very profitable after you fed it to a hog.
I don't think hay at $175/ton is profitable fed through a beef cow? I think you really do need hay at around $60/ton or some alternative feed like DDG and straw that is competitive to that figure?
What does it cost to feed a cow per day in the winter? If we go with 35/lbs X 3cents ($60/ton) = $1.05/day? If we feed that same cow 35 lbs. X 5 cents ($100/ton)=$1.75/day? If you feed for 200 days it is $205 vs $350......a difference of $145? Many years that difference represents whether the operation is profitable or not.
Hopefully people involved in the cow business raise cattle for a profit (sometimes I really wonder!)?
TNT makes a good point about farmers not wanting to do the "dirty work" anymore...."sit in an air conditioned cab and go south for the winter"? And I agree he has a good argument there? The younger generation sees no point in working for nothing....and the older guys are just wore out!

[per]

I was talking to a friend in Southern Sask last night and we had this conversation. High quality hay is being baled in big squares and heading for Texas on super B's and for the past several years straw has been more expensive than hay. The closer to year round grazing I get the easier it is to pencil the cows both in terms of money and labor.

[grassfarmer]

ASRG you say "Hopefully people involved in the cow business raise cattle for a profit (sometimes I really wonder!)?"
Part of that equation is realistically evaluating the yardage component - feeding cows for 200 days costs a lot of money in terms of diesel, labor and machinery costs.
I agree with what per says "The closer to year round grazing I get the easier it is to pencil the cows both in terms of money and labor"