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High Hay Prices Likely To Continue

High Hay Prices Likely To Continue

Supplies will remain tight and farmers are likely to plant more acres.

High hay prices are likely to continue, says Matthew Diersen, South Dakota State University Extension risk/business management specialist.

Usually, farmers plant more alfalfa when hay prices are high. But with solid returns expected for other and the available or revenue insurance for other crops have limited hay to an expected 3.1 million acres.

Tight hay supplies, low expected production for 2013 and no difference the national picture suggest that hay prices will continue, he says.

Hay supplies look like they will remain tight, despite high prices.

South Dakota hay prices have been at high levels throughout the 2012 marketing year. Based on numbers from the National Agricultural Statistics Service, March alfalfa prices were at $230 per ton and have remained steady for several months. The March price for other hay reached a record high of $170 per ton.

Price prospects continue to favor sellers over buyers.

"Fall disappearance was unusually large leaving a stocks level on Dec. 1, 2012 of only 4.3 million tons. The stocks level was the smallest since Jan. 1, 1977 following the 1976 drought," Diersen said.

He says current stocks are also similar to the levels in late 1989 when there were only 3.35 million head of cattle in South Dakota inventories. On Jan. 1, 2013 there were 3.85 million head.

Diersen says modeling historic stock levels and winter use gives competing views of just how little hay may be left in South Dakota.

"Usually, much of the hay produced in South Dakota is used for feed and not sold. As part of the collective feed inventory, one could take the Dec.1 stocks and use them evenly over the remaining six months of the feeding year," Diersen says. "Most years, producers try to maintain a surplus over that level. Likewise, high prices may mean some hay that was raised for on-farm use enters the marketing channel. Factoring in the high price level actually forecasts a negative stocks level for May 1.”

Source: SDSU

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