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Planting intentions report a first indicator of market trends

This year’s March Planting Intentions Report could provide some surprises if it falls in line with speculation that we’ve recently heard from several industry sources.

Last fall several industry observers assumed that the National Agriculture Statistics Service (NASS) report, which is released at the end of March, would likely show a huge increase in acreage in California this year. But that doesn’t appear to be the case now that the 2006 season will soon be under way in major hay producing areas of the state.

One source who buys a large quantity of hay, primarily in the Central Valley, noted that quite a few growers in his area were forced to sit on the sidelines when unusually wet weather in December put a lid on planting operations. He believes that any increase in alfalfa acreage will be less than what was being predicted last fall.

Speculation that growers would look at market trends over the last two years, and see it as a signal to jump in this year raised concerns. In November, for example, CAFA received a call from an agricultural credit association that was hosting a meeting of lenders and was looking for a speaker to update the group on the alfalfa market. There was concern among lenders that record high prices in 2005 would prompt a huge increase in acreage and significantly impact the market. The caller admitted to having the same concern until reading the September issue of CAFA News, which pointed out that the continued growth of California’s dairy industry has made it clear that the state’s alfalfa growers are hard pressed to meet current demands for high test hay.

The ag credit association used the September newsletter and updated it with information from the NASS Web site to present at its meeting.

The December issue of CAFA News featured an in-depth article by Seth Hoyt of the NASS’ California Field Office in Sacramento. The article summed up the 2005 alfalfa hay market and provided insight into the 2006 market. Hoyt’s sources indicated a 5 percent to 10 percent increase in acreage and prices that would be $10 to $20 per ton below the 2005 alfalfa hay market. Even with a $10 to $20 per ton price drop, however, 2006 “would still be the second highest market on record,” he pointed out.

All bets on a strong market are off, of course, if dairymen get squeezed by significantly lower milk prices, a concern that was being voiced by some observers late last year. But recent contacts with two dairy industry sources indicate that any lowering of milk prices will be less than what was being projected several months ago.

Those who follow the NASS reports know that the March Planting Intentions information lumps all hay crops together and doesn’t break out alfalfa, leaving some room for speculation on acreage trends. The breakout for alfalfa acreage occurs when the Ag Statistics Service releases its June report. While industry observers have mixed views on what’s in store for the entire 2006 season, no one should be surprised by a strong early market due to a low carryover of hay stocks.

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