A large crop and waning exports have weakened hay prices. While prices have likely bottomed out, export and domestic demand has been slow. Ongoing port challenges have been resolved providing relief for hay exporters.
Rains delay Northwest hay cuttings
Weather delays have created challenges for hay production across the Northwest. In Idaho, spring thunderstorms delayed the first cutting. Rains from Hurricane Hilary reached Idaho in late August, though luckily many hay producers had time to plan and avoid rain damage. A trough of cold weather brought more rainfall to eastern Idaho in late September, damaging the final cutting. The third alfalfa cutting is mostly complete, but the fourth cutting is behind with only 34% completed on September 24.
In Oregon, hay producers were initially delayed in starting the first cutting and rain delayed harvest. The production outlook is a mixed bag for Oregon as some regions are still dealing with drought. Straw yields were as much as 50% lower than last year’s yields.
Washington’s Columbia Basin has seen less rain and test quality for first cutting is lower than producers hoped. Hay conditions in Washington are generally good, but prices have declined. Fourth cutting for alfalfa is ahead of the five-year average with 69% complete during the last week of September. Conditions were dry in mid-September when Washington wrapped up final grass cuttings.
In Montana, rainfall has been the driving factor for hay quality. Hay conditions vary greatly across the state. Second cutting in Montana is about two to three weeks behind normal harvest timelines. Local demand for hay remains light while straw demand has been moderate. Many ranchers say they won't need to buy much (if any) hay this year as they were able to put up enough of their own hay.
Dairy demand is a mixed bag
Dairy demand for hay remains a mixed bag as weakening margins have shifted how dairies purchase hay. Hay prices are nearly half the cost they were a year ago, however, some dairies are still resistant to purchasing hay at current prices. These dairies are buying on an as-needed basis while waiting for lower hay prices. This could pose challenges for both dairies and hay producers. Many hay producers believe prices have bottomed out and prices will likely remain steady for the rest of the year. Dairies that are waiting may not find lower prices. It is unlikely the stalemate will last long, as many dairies will need to start purchasing hay for winter feeding.
Hay exports pick back up, but still slow
Alfalfa hay export demand has been slow throughout 2023, with most buyers only purchasing to fill an order. Export demand has been light due to inventory buildups in hay-buying countries and exchange rates. In 2022, the dollar strengthened against all three of the largest hay export destination currencies (Chinese Yuan, Japanese Yen and Korean Won), making U.S. hay more expensive for international buyers. This led to a decrease in hay exports and the timothy hay export market was impacted the most. China (the largest export destination for alfalfa) has experienced low milk prices and dairies are trying to get by as cheaply as possible by using more local forages. Some exporters believe China will start buying U.S. hay again soon because they have worked through their backlog at the ports. But with low milk prices recovery will likely be a slow process for China’s alfalfa demand.
Due to continued low export demand, exporters estimate that 40% of timothy hay acres in the Washington Columbia Basin were removed after first cutting. The majority of the remaining second-cutting timothy will be put into small bales to be sold locally.
Despite slow trade, demand started to pick up in August signaling hay prices have likely bottomed out. Exporters are very concerned with the quality of hay they buy and are avoiding any stacks that are not protected from weather. For producers, it will be harder to sell low-quality hay at a price that covers the cost of production, as buyers are being very careful. Producers who have options to sell their hay should do so. Prices are unlikely to increase as the production season comes to an end.
Port issues resolved
The Pacific Maritime Association and International Longshore and Warehouse Union reached an agreement in late August ending nearly 13 months of ongoing contract negotiations. The new contract expires in July 2028 and will help ensure fewer disruptions at the ports. In previous negotiations, port shutdowns were determinantal to hay exports and some analysts believe it took more than three years for exports to resume at full volume following the delays. Alfalfa is the top container ship export out of the Port of Seattle and this contract can allow hay exporters to breathe a sigh of relief.
Profitability
Inventory carryovers and better growing conditions have softened hay prices from 2022 records and many hay producers believe prices reached a price floor in August. Northwest alfalfa prices have closely followed the downward national trend. In July 2022, premium quality hay in Idaho traded for over $320 per ton. In July 2023, while hay trade was just starting, supreme alfalfa in Idaho traded for $280 per ton. The average Northwest alfalfa price has declined by more than $50 per ton. Hay producers should expect prices to continue a downward adjustment throughout the fall. While hay prices have softened, production cost reductions will support hay profitability. For more information on production costs, see the Crop Inputs Snapshot.
Most western hay growers will benefit from improvements in growing conditions, although some still face drought conditions (overall, less severe than two to three years ago). The quality and overall profitability of the 2023 crop were largely dependent on weather with rain delays hindering additional cuttings in many regions of the west. Timothy hay growers continue to face lackluster prices and weak demand, resulting in many producers switching production from timothy after the first cutting because of low returns.
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