Tennessee Direct Hay Report

Rock Valley Hay Auction (Mon) - Rock Valley, IA

Rock Valley Hay Auction (Thur) - Rock Valley, IA

Dakota Hay Auction - Corsica, SD (Monday)

Dakota Hay Auction - Corsica, SD (Seasonal - Friday)

Iowa Direct Hay Report

USDA Hay Markets – December 31, 2024

Have Western hay prices bottomed out?

Josh Callen put it plainly: Growers are selling hay for 2019 prices while paying 2024 production costs. That’s how the author of the Hoyt Report set the scene for the Western market during his annual analysis at the California Alfalfa & Forage Symposium last week in Sparks, Nev.

Callen said low hay prices coupled with high inflation has been a major hurdle for producers this year, which echoed his observations last year. However, the market analyst had a rosier outlook this time around, suggesting that Western hay prices appear to have established a floor and could very well be on the rise.

 Before shedding light on the positive prognosis, Callen offered four reasons why the current market has reached such a low. Those include light demand from major export markets, low commodity feed prices, less alfalfa utilization by dairies, and reduced drought pressure in the West.

Light export demand. Hay exports largely influence the Western hay market, especially in the Columbia River Basin and the Imperial Valley. Even though total hay exports have been up about 6% compared to last year, Callen said demand for U.S. alfalfa hay has shifted downward, largely because of China and its failing dairy industry.

Despite milk not being a staple food product in Asian countries, Callen explained that China’s government began artificially building its dairy production in 2018, sending alfalfa exports skyward. Without sufficient consumption to sustain the market, though, Chinese dairy hit a wall, and then took a dive, pulling milk prices and hay demand downward as well.

Trade has also been relatively soft among other large export markets, namely Japan and South Korea. Callen suggested this is due to the unrelenting strength of the U.S. dollar against the Japanese yen and South Korean won. In fact, the exchange rate between the dollar and the yen has reached 20-year highs, which has prompted Japanese government to subsidize domestic hay production for dairy, curtailing its demand for U.S. product.

Low commodity prices. Assessing the situation stateside, Callen said hay prices are highly correlated to commodity feed prices, which have been sitting in a valley for most of 2024. In this case, many farmers opt for cheaper protein substitutes to include in mixed rations, like soybean or canola meal, dampening the demand for alfalfa hay. Even so, alfalfa inclusion rates have already been on the decline for several years, which led Callen to his next assumption.

Feeding trends. A shrinking number of dairy farms in Western states, as well as the rest of the U.S., has warranted much less competition in the market than there used to be.

Moreover, alfalfa inclusion rates are roughly 3 to 5 pounds per cow per day where that number previously reached 10 pounds per cow per day a decade ago. “That’s a big change, and it’s something I think the industry needs to understand and determine what we can do to counteract that and get accurate information out there about the benefits of alfalfa for dairy utilization,” Callen asserted.

Drought. As many parts of California escaped the grasp of drought status, water was no longer a scarce resource for farmers. Callen suggested this may have contributed to a wider price spread among hay qualities this year. Lower hay grades sold cheaper throughout the summer while Supreme and Premium quality hay prices remained relatively stable.

“As we came out of those drought conditions and there was a lot of lower quality hay available, that market really shrunk compared to the higher grades,” Callen said.

Looking ahead

In addition to the absence of drought, Callen noted favorable weather during the growing season offered ideal harvest conditions for many growers, with few instances of delayed cuttings or rained-on hay in late summer and fall. As dairies use up the surplus of lower quality alfalfa that bolstered hay stocks at the start of the season, that oversupply may begin to tighten up and help hay prices recover. The mention of dairy hay contracts, which are already being made in the Imperial Valley, may also give a nod to the direction hay prices are headed early next year.

“We could see an increase [in prices] for those lower grades coming into next year in the Great Basin,” Callen purported.

He also suggested the decline in alfalfa acreage may turn around, especially as almond acreage seems to stabilize. This could be due to a number of factors, including stricter water use regulations. Nonetheless, Callen expects the number alfalfa plantings to hold steady, if not improve, in many Western states.

Timothy acreage is also expected to improve as the same favorable weather conditions for alfalfa encouraged better timothy production, which was a bright spot for many Western growers this year. Callen reported that timothy yields were up, quality was high, and grass hay prices were strong, stiffening the competition for alfalfa. However, it’s uncertain if the timothy hay market will continue to prosper next year as acreage and production are both expected to grow.

Overall, the market analyst suggested 2024 could be the last of a multiyear alfalfa hay price decline. The last time the market took a similar tumble was between 2014 and 2015 before prices slowly started to climb out of 2016 and into 2017. The biggest questions that remain are how the strength of the U.S. dollar will change export dynamics and if tariffs proposed by new government administration will take shape and influence trade dynamics.

“I saved the good news for last — it feels like we’ve bottomed out,” Callen said to conclude his presentation.

Hay exports are a different ball of wax

The climate of the U.S. hay export market has gone from good to difficult to different. Different, or strange, according to Scot Courtright, who explained how trade has changed over the past few years at the California Alfalfa & Forage Symposium in Sparks, Nev.

Courtright is the owner of Courtright Enterprises, an export company based in the Columbia Basin, where he oversees logistic operations and international sales. He said hay exports this year have largely been influenced by three things: an uptick in West Coast imports, trade conflicts on the Red Sea, and demand shifts from individual markets.

There are two major reasons for greater import volume on the West Coast, Courtright said. For one, importers are trying to get ahead of potential tariffs proposed by the Trump administration, causing a surge in incoming shipments. Secondly, even though the East Coast’s International Longshoremen’s Association (ILA) formed a new contract agreement following port strikes this fall, another union strike will likely occur there early in the new year.

“More volume has shifted to coming into the U.S. on the West Coast because of the challenges and the fear of strike or turmoil on the East Coast,” Courtright explained. On the contrary, the labor union on the West Coast signed a contract negotiation last year, which should mitigate the risk of port strikes there for at least five years.

Crisis on the Red Sea

In addition to where shipping containers are arriving, the route they are taking has changed as well. Rebel attacks in the Red Sea have disrupted trade through the Suez Canal, which accommodates the vast majority of the cargo from Asia to Europe, the largest trade route in the world. These attacks have eradicated insurance for vessels through the Red Sea, prompting a reroute around the Cape of Good Hope in South Africa, adding three weeks of transit time.

Following the COVID-19 pandemic, shipping rates significantly declined. In fact, Courtright notes rates that previously hovered around $7,000 per full container dropped to nearly $1,200. This was largely unprofitable for ocean carriers, which consequently started to pull services; however, Courtright contended the conflict in the Red Sea and extended shipping route has actually helped the situation by keeping ocean services intact.

“The powers that be are allowing the situation in the Suez Canal to continue, because if the canal were to open up completely, ocean rates would likely drop significantly as there would be an overwhelming surplus of capacity,” he said.

The big three

After discussing shipping logistics, Courtright detailed the current environment of each major export market.

Japan is the largest export market for all hay, including roughly 500,000 metric tons (MT) of alfalfa, 300,000 MT of timothy, and various other types of grass hay and straw every year. With that said, as the U.S. dollar has strengthened with rising interest rates, the exchange rate between the Japanese yen has skyrocketed, significantly impeding the Asian country’s buying power.

Japan is currently importing about 85% of what it did five years ago. Timothy hay exports to Japan stalled with high prices during most of 2024, but Courtright predicts these prices, and thus demand, are on the mend. Alfalfa exports to Japan are also looking up compared to last year as dairies there are feeding cows more alfalfa; however, neither grass nor alfalfa volumes are expected to reach so-called normal levels.

“The remaining 15% is likely gone for some time,” Courtright asserted. This prediction was based on government subsidies that are encouraging Japanese dairymen to grow and feed homegrown forage.

South Korea is the largest grass straw export market for the U.S. Courtright said trade dynamics between South Korea appear to be healthy despite political turmoil in the Asian country, with exports rebounding to nearly 100% of typical levels. He also noted the South Korea’s quota system for grass hay will be completely phased out by 2026, which may benefit future trade.

China is the largest export market for U.S. alfalfa hay; however, it was the market with the single largest decline in volume last year. Courtright said Chinese milk prices have slid for 40 months straight as the dairy industry there crumbles. Roughly 60% of the Chinese dairy industry was unprofitable in 2023, and that number jumped to 80% in 2024. And as Chinese producers reduce their herd size, it’s not a good sign for the amount of alfalfa they will need.

Chinese-owned companies based in the U.S. have also influenced export volume as of late. Courtright said about 30% to 40% of hay volume shipped to China each month funnels through these companies, making that product inaccessible to exporters. This doesn’t necessarily threaten hay growers, Courtright said, but it definitely throws a curveball in the export market.

The final change in trade with China has been shipping logistics. What used to take two weeks to ship hay directly from the West Coast to northern China ports now takes about a month as main vessels must be transferred to smaller vessels throughout inner Asia.

Final thoughts

As other countries expand hay production, Courtright suspects U.S. customers may begin buying from more reliable sources. “The U.S. has been looked at over the last several years as an unstable place to supply from due to a lot of our labor issues and volatility in our pricing,” he said.

On the other hand, Courtright pointed to government programs in Middle Eastern nations that are eliminating feed crop production in favor of more food production for human consumption. As these laws gain footing, demand may improve with a more diversified customer profile. Even so, Courtright said the largest opportunity lies in India, where U.S. alfalfa is in the midst of being approved.

Overall, Courtright purported the worst is over in terms of low exports out of the West as volumes trended higher this year and look to continue to climb. He is hopeful that trade negotiations led by the incoming administration will enable a better outlook next year as well.

USDA Hay Markets – December 24, 2024

Dakota Hay Auction - Corsica, SD (Monday)

Livestock Exchange Monthly Hay Auction (3rd Sat) - Brush, CO

Dakota Hay Auction - Corsica, SD (Seasonal - Friday)

Regional Hay Prices

State-By-State Hay Summary

Colorado—In the Dec. 19 report, compared to last report, trade activity and demand light. Small squares of horse hay steady. Next report will be released Jan. 9, 2025.

Missouri—In the Dec. 19 report, compared to last report, hay moment remains fairly slow and there is plenty hay for sale with much of it priced below the cost of production. Hay prices are unevenly steady. The supply of hay is moderate to heavy, and demand is generally light. Overall mild weather with above average temperatures for the fall has preserved much of the abundant hay supply which is good given how little fall pasture existed.

Nebraska—In the Dec. 19 report, compared to last report, hay sales sold steady. Demand was mostly light. Best demand coming from backgrounding and feedlots. Weather remains very nice for this time of year and caretakers are not having to feed extra resources to maintain weight on their livestock. But, living in Nebraska all that could change with a blink of an eye. Many sellers of hay would like to see some snow to cover up stock fields or winter range so they could move additional tons of hay before the 2025 haying season arrives. Reporting will resume the week of Jan. 6, 2025.

Oklahoma—In the Dec. 20 report, compared to the last report, demand for hay is light, and prices remain steady. The availability of Oklahoma hay is high as most hay producers still have barns full of hay. The rain in November has helped with many cattle producers’ land, allowing continued grazing rather than feeding hay. Next report will be released Jan. 3.

Texas—In the Dec. 13 report, compared to last report, hay prices are mostly steady across all regions. Hay movement and demand have picked up. Livestock producers across all regions have began supplemental feeding as cool season grasses have enter dormancy. Key rains and abnormally warm temperatures in the Panhandle and portions of the North have offered the winter wheat crop a key boost, giving livestock producers hope for a good winter grazing season. However in other regions of the state drought conditions have intensified. Next report will be released Jan. 3, 2025.

South Dakota—In the Dec. 20 report, compared to last report, temperatures were cooler than normal over the Dakotas. Severe drought in western South Dakota has improved some. Next report will be released Jan. 3, 2025.

New Mexico—As of the Nov. 22 report, the hay season was complete. No more reports will be issued until spring 2025.

Wyoming—In the Dec. 19 report, compared to the last report, according to producers movement and demand is light all over Wyoming, even though a couple of deals were made this week that moved some hay. There will be no reports the week of Dec. 23 and 30.

Montana—In the Dec. 20 report, compared to last report, hay sales were too lightly tested this week to develop an accurate market trend, however lower undertones were noticed. Buyers report very light demand going into the holiday season. Hay movement remains very slow. Warm weather and open pastures have allowed ranchers to keep cows out on pasture and even some up at higher elevations. Hay usage is very light as a result. Producers continue to advertise hay with some dropping asking prices in an effort to move supplies. Despite dry conditions ranchers show little motivation to buy hay. Supplies of hay remain heavy across much of the state. Demand from horse hay buyers remains good, however these sales are mostly single or partial load sales and not a large percentage of the market. Hay producers still have a heavy supply of rained on hay and demand for rain damaged hay is very light. Old crop (2023) hay and straw remains on the market and producers are struggling to move this hay as many report offerings are under production cost. 

Montana Direct Hay Report

California Direct Hay Report