Although hay prices are still relatively high compared to long-term norms, several factors are at play to create a challenging environment for hay growers going into the winter season.
Year in and year out, alfalfa hay has been one of the most consistently profitable agricultural commodities grown in the region, according to Bruce Bosley, who follows the industry as a cropping systems specialist for Colorado State University.
But although prices are still relatively high compared to long-term norms, several factors are at play to create a challenging environment for hay growers going into the winter season.
“The trend has been a lot more toward alternative forages,” Bosley said. “Many dairy producers have gone almost exclusively to corn silage as the base for their rations. It’s a trend across the U.S. ”
In recent years, the Leprino Foods cheese plant in Denver brought a surge of dairy growth to Northeastern Colorado. But David Hinman, an award winning alfalfa hay producer from across the border in Wheatland, Wyoming, still finds himself shipping much of his production far beyond the immediate region to Lexington, Kentucky, horse farms and Iowa’s Amish dairies.
Hinman said the large dairies nearby drive such a hard bargain that he’s able to tap better markets elsewhere. When compressed, the large square bales he produces are even economical to ship to buyers in China or Japan.
Don Leonard, the president of the Colorado Hay and Forage Association, confirmed that many hay producers are facing a tough marketing challenge this year, even with the local expansion of the dairy sector.
“We’ve overproduced for this year,” he said from his farm near Brush. “We’re selling hay below the cost of production.”
As winter returns, improved precipitation patterns and an abundance of feed crops have helped bring relief to livestock producers. Leonard said he doesn’t begrudge dairies, feedlots and ranches their improved financial margins, but noted, “They’re all making money. Why shouldn’t we make money? I need to make a living, too.”
Unless a producer is selling top-tier dairy hay — or the winter helps out by bringing lots of heavy snow to cover standing forages — Leonard said hay growers would probably be taking a hit on their hay crop. Lower quality “grinder” hay that sold for $150 to $175 a ton a year ago is now bringing $80 to $90 a ton, he said.
“That’s quite a drop in your income, and none of the costs have come down,” he said.
There’s also an abundance of medium to good quality hay available this year, a reversal of recent winters when supplies were tight.
That’s largely a function of shifts in the weather. The high dry climate of the West remains ideal for growing alfalfa, since slower forage growth leads to higher nutrient levels.
“Our elevation is fairly high, and the nights are cool. That helps keep our stem size small and elevates the relative feed value,” said Donn Randall, crop and forage program manager for the Wyoming Business Council.
More summer rainfall — as the region experienced last summer — hurts hay growers’ ability to control moisture through irrigation and makes it difficult to get hay put up in a timely fashion before quality deteriorates. In fact, problems getting hay harvested were widespread across the Central Plains this year.
Earlier this fall at an international trade show Hinman was even looking into buying a hay cap. The device, invented by Australian Phil Snowden and manufactured in Denver, prevents rainwater from gravitating down through stacked hay. (The sides of the bales remain uncovered, but pose only marginal reductions in hay quality.)
“Since we’ve been in a drought, I hadn’t needed it before,” Hinman said.
When hay producers do face challenges from poor weather or falling prices, they don’t have much of a safety net to fall back on, he added.
Alfalfa “has kind of been neglected. It’s a great crop, but there’s no government-type help at all,” Hinman said. Only about 10 percent of the country’s alfalfa acreage is enrolled in any type of federal insurance, according to national estimates.
There’s a movement under way to provide more viable insurance protection for alfalfa and forage growers. This year the U.S. Department of Agriculture’s Risk Management Agency hosted a series of listening sessions around the country to gather input on how to create a stronger, more effective program and attract more participation.
Bosley points out that hay production is high risk because crops are harvested multiple times throughout the year, with quality varying from cutting to cutting, requiring sellers to identify a range of different markets. And while dairies often hire full-time nutritionists to help engineer least-cost rations using alternative forages, horse numbers are also down due to a sluggish economy, leading to declining demand at the same time other crops benefit from more federal support.
All that means hay acreage is declining while corn acreage is expanding, according to Leonard.
“We’re a victim of highly subsidized corn,” he said.
Several recent advances have been introduced in the alfalfa industry. They include an alfalfa genetically engineered to be lower in lignin, which increases digestibility, recently approved by USDA, and drought-tolerant alfalfa varieties developed by New Mexico State University. USDA also instituted a new Alfalfa and Forage Research Program, which awarded $1.25 million in research grants to several land grant universities this year.
But Leonard said the industry could still benefit from more consistent funding for new products and innovation. Industry leaders have even tossed around the idea of creating a national check-off program to fund research and promotion. But it’s hard to get hay producers engaged on the issue.
“Hay producers are notorious for doing their own thing,” he said.
In the short term, Leonard’s best advice for hay marketers is to bite the bullet and “clean up the supply of damaged hay we’ve got.”
“As a result of the high prices from the drought, everybody jumps in and you’ve got hay brokers everywhere. But we’re going to have to do a better job (of managing our business),” he said. “We’re going to have to come up with a reason for dairies to use alfalfa again. I’ve already got the machinery and the ground, so I’ve got no alternative but to try for another year.”