I am the planning type, and people like me go crazy in the winter as we sit and look at our cold, wet fields and plan for next year. I have run literally hundreds of scenarios through my head in the last couple months as I prepare for next year.  One big choice however looms for me and perhaps other farmers in Oregon.  If we are going to stay in the hay business, which hay market are we going to cater to for the next few year?  In Oregon, the difference between the cattle and the horse market is pretty much night and day and I think that a grower has to dedicate him or herself to one or the other in order to succeed.

Making a decision on which hay market to be in is not just a one year commitment.  The horse market pretty much requires small bales and most horse owners prefer orchard grass or timothy hay.  The cattle market is almost exclusively alfalfa hay and most operations take big bales.  So right off the bat, we see that there are two separate lines of equipment, as well as two separate products to grow for the two markets. There are a lot of variables in this discussion, but the one I want to focus on in this post is supply and demand.

Unlike wheat or corn, a hay-field usually lasts at least 5 years before it needs plowed under and replanted.  because of this, when I am making the decision on which hay crop I will plant, I consider what the demand will be in the next 3-4 years.  As of right now, both markets are red-hot. Horse hay is going for over $240 a ton here locally in Central Oregon, while high-test dairy alfalfa is the same or higher. Usually alfalfa is $20 or so a ton cheaper, but right now that price difference is gone. These high prices make the hay market look real attractive obviously, but I remember 2009 when prices spiked like this, and in 2010, prices were right back in the $130 range.

However I see something different in the hay markets going forward. Cattle numbers are at a 50 year low right now, and alfalfa still is commanding a great price. It is hard to imagine cattle numbers to keep dropping much in 2012, especially as the global economy gets back on its feet. Milk prices are back up and as long as dairymen get those checks, I don’t see any reason why alfalfa demand will drop at all next year. Alfalfa takes a year to establish in high altitude areas, so if the acres come back into hay from wheat and corn, the new high-test, high altitude hay hitting the market won’t be until 2013.  Of course if you are reading this in warmer climates, your new seeding alfalfa is probably coming right along and you will be all set for 2012, but premium high altitude dairy hay will be planted this spring and one good cutting will be taken off this next year. (Forage hay might flood the market if we see a rise in new seeding alfalfa fields.)  All in all, seems like the supply will be pretty constant of what we saw this last year, a warm spring might help 1st cutting yields, but I don’t predict a huge deluge of alfalfa acres planted.

Now for the horse market. I am amazed how the orchard grass prices have been slowly climbing all year long! I thought that we would hit a ceiling at around $220 a ton, but I see grass hay for as much as $270 a ton.  This year especially in Central Oregon, many farmers chose to rotate their grass fields out and there was a whole lot less hay put up for the horse market. I think that the demand for horse hay in 2012 will be down from this year as the economy forces horse owners to liquidate their animals. Feeding one horse is expensive, but if you have three or four in the back pasture that you don’t ride, they sure look like luxury items when hay is $240 a ton!  The horse slaughter ban was also lifted this fall, which may take care of the unwanted horses that seem enumerable.  I think local demand will drop by a good amount, and unless we see some new hay fields planted locally, the supply will drop as well. The Pacific Northwest is blessed with healthy market for hay overseas, but there has been some articles about foreign buyers starting to balk at these high prices.

I think that there is far more stability in the alfalfa market going forward. I am a big fan of small fertilizer bills and big bales of alfalfa, versus high fertilizer bills and small bales of orchard grass.  I don’t think that the horse market will be willing to pay premium prices in the next few years. Dairymen and cattle producers have every reason to be enraged over $240 a ton alfalfa, but I see a greater stability in the milk and beef markets that will enable profitable alfalfa prices in the future.

 

 

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