NEWS
Ample Stocks Ahead
Mon Aug 24, 2015 10:53 AM CDT
(Page 1 of 2)
Drought recovery in many areas has led to higher stocks, brighter production prospects and moderating prices. (Progressive Farmer photo from DTN Archives)

Beef producers across most of the nation should find ample hay and feedstuff supplies this winter, along with moderating prices.

"In the national hay complex, during 2014 and into 2015, we are seeing a trend toward normal prices and normal stocks," said Jessica Sampson, an economist with the Livestock Marketing Information Center (LMIC). It provides economic analysis and market projections for the livestock industry.

After the recent widespread drought reduced supplies and generally increased prices, stocks are now up significantly. This is especially the case in the big cattle-producing states, according to the USDA's most recent hay report, "Feed Outlook," released in May.

"Together with favorable pasture and range conditions, that would lead us to project continued softening of hay prices for the 2015-16 marketing year," Sampson said.

According to USDA, by this past May, hay stocks had rebounded by 27.9% compared to year-ago levels. At 24.5 million tons, that's 73.2% higher than 2013 levels and the highest May hay-stocks number reported since 2005. Twenty-two states posted hay-stock increases of 20% or more above the previous year.

These improved stocks meant annual prices for the May 2014 through April 2015 marketing year were the lowest since the 2010-11 season. They were still strong, however, coming in at the fourth-highest price levels on record.

Alfalfa nationwide, at $194.20 per ton, was 2% cheaper than in the 2013-14 marketing year. The price for all other hay, including grass and wheat, dropped by 6% to $132 per ton. Alfalfa ended the 2014-15 marketing year at $184 per ton while other hay was at $142 per ton.

Pre-2011, other hay prices were in the $90- to $100-per-ton range but had jumped up to $120 to $150 per ton after the 2011 drought.

PRICE FORECASTS

For the 2015--2016 marketing year, LMIC projects the national average price of alfalfa hay to be $10 to $20 per ton lower than the previous marketing year.

Other hay prices could decrease somewhat more than alfalfa, Sampson said, and are expected to be $15 to $18 per ton lower.

"That, of course, is barring any major weather-related issues during the hay-production season," Sampson said. "We started off the season well across much of the country. The Southern Plains, the Southeast, the Midwest all experienced good moisture, so increased production and bigger yields are likely."

The notable exceptions are California and other parts of the West, where drought continues to plague livestock and crops.

ACREAGE OUTLOOK

Given the moderating prices, Sampson does not expect to see a big shift in the number of acres utilized for hay this year.

"Lower prices don't incentivize a shift to putting more land into hay production, so we do not expect a major increase in production from more acres," she said. "Right now, hay-producing acres are fairly consistent with what we saw in 2014."

Sampson noted one possible area of concern this season is the supply of high-quality hay like alfalfa, especially from first cuttings. Hay growers in many parts of the country suffered from "too much of a good thing," as more-than-abundant rains forced them to choose between putting up hay that was too wet or waiting until it was too mature. Many growers in Ohio and other parts of the Corn Belt expected to lose one cutting of alfalfa production.

OTHER FACTORS

In a supply and demand market, Sampson also has to consider the fact there are now more cattle to consume the nation's hay.

"As of January 1, we were seeing an increase in the cattle inventory as producers began herd rebuilding," she pointed out.

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