Hay market analyst Seth Hoyt projects 2009 California alfalfa acreage to be down, despite coming off a good 2008 hay season.

The former USDA/NASS analyst who now operates his own subscription market news service, told the 2008 California Alfalfa and Forage Symposium in San Diego, Calif., that he projects California alfalfa acreage to be only 925,000 acres this season — 25,000 less than 2008.

“For the second consecutive year, alfalfa acres will not follow historical patterns,” Hoyt says. “Even though the alfalfa hay market in 2008 was a wreck the last part of the season, two-thirds of the season was good, so there was still profitability there.”

That would indicate growers would increase acreage, and it may happen

It all depends on the water supply available as California goes into what many are predicting will be a third drought year.

“Some growers are not planting all their alfalfa at once,” he says. “They're waiting until spring to plant the balance to see if they get enough water.”

Another factor impacting alfalfa is wheat. “In the Central Valley, we'll see more beardless wheat where growers have three options — green chop, hay, or if the grain market improves, wheat for grain. In the Imperial Valley, we won't see as many durum acres as we saw this year, but I think it'll still be the second largest we've seen for a long time.”

Hoyt also believes some alfalfa acreage will be displaced by processing tomatoes. “Wheat will also be the biggest crop to displace cotton acreage,” he added.

“I think alfalfa hay prices will be lower in 2009,” he says. “I think supreme alfalfa hay delivered to dairies in Tulare will be $230-$240 a ton. Two months ago, I thought it would be $250-$260, but I lowered that estimate due to milk prices.”

The floundering world economy has a lot to do with that.

Last season, alfalfa hay production was down 5 percent. Hoyt expected a drop of 8 percent to 10 percent, but strong summer hay prices netted more tonnage.

Supreme alfalfa hay prices in the Imperial Valley opened 2008 very strong, topping out at $220-$225 a ton in March, according to Hoyt. That same hay delivered to the Tulare, Hanford, Visalia and Bakersfield dairies in March brought up to $270 a ton — a record high.

Top fair quality alfalfa hay was around $205 a ton in early June. “By Aug. 1, that market had climbed to $230 in the Central and Southern San Joaquin valleys,” Hoyt says. “Good quality alfalfa for export in the Imperial Valley was just over $205 a ton in early June and ended up just over $230 a ton. We saw the most alfalfa hay exported from Imperial Valley than we have in a lot of years, maybe ever.”

That's primarily due to the Japanese resisting the 35-year record price of alfalfa in Washington state and turning to California, he says. California normally exports about 1.5 percent of its alfalfa. In 2008, it was up to 3 percent.

Milk prices started off in 2008 higher than they were in 2007, ranging around $16.50-$17.50 per cwt. “It wasn't great, but all indications pointed to $19-$20 milk by the fall,” Hoyt says.

That scenario didn't play out due to the milk management programs by the co-ops and a weakening economy. By July, dairy cow numbers had started to decline.

“With the current herd retirement program, we anticipate further month-to-month declines in dairy cow numbers in California,” Hoyt says.

That assessment was later echoed by Eric Erba with California Dairies, Inc. in Visalia, Calif. “The industry is at a crossroads,” he says. “There are four factors shaping the dairy industry for the next few years.”

Those are: processing plant capacity, milk supply management, the vulnerability of the Western dairy model and export markets. It's becoming more expensive to build processing plants, obtain air and water permits and jump through other hoops, he says. “They're rolling out the red tape instead of the red carpet.”

World prices for milk are usually below domestic prices, according to Erba, and vulnerability to feed prices has made it difficult for growers to control costs.

However, dairymen had more feed choices last season. “Wheat harvested for grain acres in California was up 76 percent in California in 2008 as compared to the previous year,” Hoyt says. “Wheat production was up 91 percent. Wheat-for-grain yields were at a record high. Wheat straw production was much more than what we thought it would be.”

Twenty percent of the wheat produced in California is dryland wheat. Little rainfall after February had most predicting statewide production would be down. “Irrigated wheat more than made up for the dryland wheat,” Hoyt says. “The yields were fantastic. Wheat straw yields were very high. I talked to some growers who were getting 2-3 tons per acre.”

Corn silage acres were up by about 5,000 more than 2007.

“That wasn't significant,” Hoyt says. “However, what was significant were the yields were a lot higher than what we thought they would be.”

Adding to the pressure on hay prices, milk prices dove down with the economy late in 2008. In 2007, the November overbase price was $20.23 cwt. In December it was $19.09.

“Milk prices didn't do nearly what people thought they would do,” Hoyt says. “The October 2008 overbase price was $15.40 cwt. The December price is estimated at $14.10. A lot people missed this thing, including myself.”

Then, the stock market plummeted. “Let's face it, when the buyer of 75 percent of the alfalfa hay in California is hurting financially, we've got problems,” Hoyt says.