Respected hay market analyst Seth Hoyt predicts 2010 spring California supreme alfalfa hay prices at $15 to $25 per ton over a year earlier.

“I predict supreme alfalfa hay prices this spring in California’s Central Valley could bring $155 to $165 FOB the farm,” Hoyt told growers during a World Ag Expo hay-forage seminar in Tulare, Calif., in February. “Hay delivered to Tulare could bring $175 to $190.”

Hoyt’s crystal ball foretells supreme alfalfa hay prices (all FOB) on the first cutting in the Imperial Valley from $135 to $145; Arizona in the $125 to $130 range; Idaho $130 to $135; Utah $130 to $140; and Washington $145 to $155.

The asterisk on Hoyt’s projections is the impact of possible El Niño rains during the first cutting alfalfa period and fluctuating milk prices.

Hoyt’s prediction for Central Valley delivered prices on premium alfalfa hay is about $10/ton less than the $185 to $200 forecast he shared last December during the Western Alfalfa and Forage Conference in Reno, Nev. His latest numbers weigh a recent decline in Class III fluid milk prices from the $15 hundredweight to the $13 hundredweight range.

Hoyt is the author of the online subscription newsletter “The Hoyt Report,” www.thehoytreport.com. His 35 years of agricultural marketing experience include 23 years with the market news branch of the California Department of Food and Agriculture.

Hoyt served as senior agricultural economist with the National Agricultural Statistics Service in Sacramento, Calif., until two years ago.

About 75 percent of California’s alfalfa hay production is sold to dairies for feed; about 65 percent in other Western states.

“Let’s face it, the dairy industry needs hay growers just like hay growers need the dairymen,” Hoyt said.

The Western alfalfa industry is struggling to regain its economic footing. The worldwide recession substantially reduced U.S. dairy exports, resulting in a large milk surplus. Several herd reduction programs culled about 275,000 dairy cows to reduce milk output.

“It appears 275,000 cows were not enough; maybe 400,000 cows should have been removed from the market,” Hoyt said.

Dairymen faced an economic meltdown when milk prices fell from the $18/hundredweight range to about $9.75. Dairymen increased the amount of lower-priced alfalfa hay in cow rations. Alfalfa hay prices sank like the Titanic; falling about $100 to $120/ton from pre-recession record prices.

Milk prices began a slow uptick last fall to the $14.50 range providing a small profit for some dairymen, but prices have recently edged downward. Alfalfa prices have held, but there was a weaker undertone on lower quality hay in mid-February.

“In 2009 dairymen lost a tremendous amount of money and they bought alfalfa hay hand-to-mouth,” Hoyt said. "I think we’ll have a shorter supply of alfalfa hay this spring. Dairymen will pay more money for hay, but not as much if milk prices had moved to the $15 to $17/hundredweight range.”

Some experts predict milk prices will remain soft in the first half of 2010 and edge higher in the second half.

“When the money doesn’t flow like in 2009 there is no incentive for hay growers to grow more hay,” Hoyt said. “For some it’s a money loser.”

In that regard, Hoyt predicts Western alfalfa acreage will decline in 2010. He believes California acreage will fall 10 percent to 15 percent, the steepest decline among the Western states.

California’s alfalfa acreage could drop to 850,000 acres, the lowest level in 60 years. Prior to the recession, California’s burgeoning alfalfa industry flirted in the 1 million-acre range.

“Alfalfa hay growers are concerned about the latest downturn in milk prices and believe there is no incentive to add more alfalfa acres in California this spring especially after the low milk and alfalfa hay prices in 2009,” Hoyt said. “If the money is not flowing, alfalfa hay growers will remain very cautious.”

The single area in California where alfalfa hay acreage should increase is the Imperial Valley where Hoyt predicts 2,500 additional acres. The reason is the lack of other crop options in the area.

Hoyt predicts a 10 percent reduction in corn silage acreage in California in 2010. Silage and alfalfa hay are important dairy ration ingredients.

“We saw corn silage acres drop 22 percent in 2009 in California, mainly as a result of what happened in the second half of 2008 (falling prices) in the dairy industry,” Hoyt said. “There were horror stories from growers who did not get paid for silage so they cut their acreage.”

This means California’s corn silage acreage could fall about one-third over the two-year period, or about 150,000 acres.

“That is significant,” Hoyt noted.

Cow culling in California removed about 80,000 cows last year. Hoyt says about 18,000 acres of corn silage would feed those cows for one year.

Hoyt says milk prices and water availability are the leading factors that impact the number of alfalfa hay acres in the Golden State.

What crops will California growers plant instead of alfalfa hay and silage corn? Hoyt says Central Valley growers are considering cotton, melons, fresh tomatoes, and carrots. He noted, “Anything at all that might have a small profit where money is more secure.”

Hoyt says the demand outlook for Pima cotton is favorable on the international scene. The Acala cotton market, while not great, has a government support program.

On the Western alfalfa hay export front, alfalfa hay exports from California ports in 2009 totaled about 1,252,000 short tons.

The West Coast’s largest foreign alfalfa hay importer in 2009 was the United Arab Emirates (UAE), the third largest overseas buyer. Export numbers to the region spike up and down annually due to UAE distribution problems. Hoyt predicts the UAE will buy less hay in 2010.

Japan, the No. 1 West Coast hay importer, is growing more domestic hay and has increased shipments from Australia. West Coast sales to Japan have trended down over the last three years. Japan’s hay imports from all countries fell about 4 percent in 2009, Hoyt says.

West Coast hay exports to China will grow slowly. China wants to purchase supreme quality alfalfa hay at fair quality prices.

Saudi Arabia will become a buyer of West Coast hay most likely in 2011, Hoyt predicts. The country is taking a similar approach as the UAE and plans to utilize its limited water supply more for human consumption instead of crop production.

“Saudi Arabia will become a player in the West Coast hay market,” Hoyt said. “They have a large dairy industry, plus many goats and camels.”

Hoyt believes the development of future U.S. alfalfa hay exports to other areas of the world will be slow.

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