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Multiple factors impacting hay market, especially spring weather

During the second week of April a call came into CAFA from a writer for a livestock publication. She wanted information on the 2006 alfalfa hay market and asked for a “prediction” on what it will look like this summer.

When it comes to predictions, or more accurately market analysis information, we turn to a seasoned pro in Sacramento to sort out the factors that drive hay prices. In CAFA’s April Newsletter, Seth Hoyt, Senior Economist at the California Field Office of the National Agricultural Statistics Service (NASS), pointed to several different scenarios that were in play. What loomed large at the time -- besides the economic health of the dairy industry -- was the weather in central and northern California.

Records were being set for rainfall totals and for the number of consecutive days with wet weather in March and April. Several days after CAFA received Hoyt’s article, he revised a portion of the copy to keep pace with the impact of a continuing pattern of wet weather.

During the second week of April, a CAFA grower member in the Sacramento Valley figured that it would take at least three weeks of good weather for alfalfa fields to dry down. He also noted that if the weather turned too warm it would obviously create more production problems. But as luck would have it, the third week of April started with even more rain.

The full extent of the unusually wet spring won’t be known for a while, but there’s no question that it has had an impact that will linger for some time. Therefore, acreage forecasts will be difficult to analyze as production takes what is expected to be a big hit. The first indicator of acreage trends came in late March when NASS released its Planting Intention report for “all hay,” which forecast 100,000 more acres for California in 2006. The projected increase was no surprise, given the strong alfalfa market the past two years and prior projections for fewer cotton acres in the San Joaquin Valley.

As Hoyt noted in his article for CAFA News, however, “you can’t bet the farm on the March hay number being the same as the final estimate for the year.” Last year, for example, the December estimate for 2005 came in at 50,000 acres below the March estimate. There was an even a bigger swing in 2004 when December’s final estimate was 120,000 acres higher than the March Planting Intention report.

Even if this year’s Planting Intention report for 100,000 more acres of all hay is a relatively accurate indicator, there’s still plenty of room for speculation. The forecast for alfalfa acreage won’t be available until the June NASS report, which breaks out alfalfa from other types of hay. Then, of course, the production factor will come into play once the weather finally returns to a more normal pattern.

Hoyt’s in-depth article for April paints an interesting picture of what may lie ahead and the multiple factors that will come into play. The next market update article will add another interesting chapter to a story that promises to have many twists and turns until the final chapter is written.

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