September 5, 2017 at 3:32 p.m.

Hay prices soar

Drought, depleted stocks combine to drive hay prices skyward
Lance Haase examines what remains of their haylage supply, which was severely reduced by last summer’s hot, dry weather. As an insurance policy against continuation of last year’s drought, the Haase family has seeded in 120 acres of alfalfa under one of their center pivot irrigation systems.<br /><!-- 1upcrlf -->PHOTO BY JERRY NELSON
Lance Haase examines what remains of their haylage supply, which was severely reduced by last summer’s hot, dry weather. As an insurance policy against continuation of last year’s drought, the Haase family has seeded in 120 acres of alfalfa under one of their center pivot irrigation systems.<br /><!-- 1upcrlf -->PHOTO BY JERRY NELSON

By by Jerry Nelson-Staff Writer | Comments: 0 | Leave a comment

PARKER, S.D. - Lance Haase doesn't like what he sees when he walks into his haylage bunker.
"We should still have a couple of weeks' worth of haylage left," he said as he surveyed the yawning concrete structure. "We'll be lucky if we make it two more days."
Haase and his father, Bruce, and uncle, Dustin, milk 380 head and farm 4,000 acres near Parker, S.D. Their operation is situated in one of the areas hardest hit by last year's drought. And to top it all off, prices for dairy quality alfalfa hay in their area have soared to more than $300 per ton.
"We usually have some haylage in reserve to fall back on," Haase said. "But the drought last summer cut into our hay yields. Normally we chop the first two crops, then bale the third, fourth and fifth cuttings, but we barely got anything for a third cutting last summer. We have been stretching our supply of haylage by grinding more dry hay to use in the ration for our milk cows. Because we've had to cut back so severely on haylage, our milk production has dropped."
The Haases aren't alone in their hay struggles. All across the Midwest, dairy farmers are grappling with high hay prices, a bad situation that has been made worse by this year's cold, wet spring.
Paul McGill, owner of Rock Valley Hay Auction located in Rock Valley, Iowa, has seen the effects of short hay supplies at his auctions.
"Last week was sort of a panic auction," McGill said. "Some of our dairy farmers are almost out of hay, but the weather just won't cooperate and let this year's hay crop get off the ground. Our top quality alfalfa has been selling in the $300 per ton range, with the second-tier hay only $10 to $20 below that. We set an all-time record at our last auction when a load of grass hay brought $370 per ton."
McGill has seen new buyers and new sellers attending his auctions, with hay arriving from as far away as Kansas and Manitoba.
"We have had some incredibly poor hay bring good money," he said. "Our local hay sellers are hanging on tight. They're sitting good, so they're reluctant to sell. This is the highest hay market we've ever seen, but we don't hear much about people seeding in new acres."
The numbers from the USDA's National Agricultural Statistics Service tell a similar tale. According to the latest NASS Prospective Planting report, Wisconsin farmers plan to reduce their hay acres by 5 percent. Minnesota farmers plan to raise 2 percent fewer acres of hay while Iowa farmers plan to cut their hay acres by 4 percent. The number of hay acres in South Dakota is expected to remain unchanged.
Matthew Diersen, Professor and Extension Risk/Business Management Specialist at South Dakota State University, doesn't see relief anytime soon for steep hay prices.
"Hay stocks in this region have been shrinking over the past two years," Diersen said. "As a consequence, hay prices are 1.5 times to twice of what they were a year ago. NASS statistics show all-time record prices for hay with the March price for alfalfa averaging $230 per ton. Even when adjusted for inflation or compared with previous drought years or compared with grain prices, we still have the highest real hay prices on record."
With nothing to pull them down, it appears that hay prices will remain stratospheric.
"There are no obvious signals for a collapse in hay prices," Diersen said. "There are too many stockpiles that need to be refilled. We don't anticipate an increase in hay acreage regionally or nationally. And due to the delayed spring, this year's production will be pulled into the pipeline early. The best we might expect would be for hay prices to return to what they were a year ago."
Despite the lofty hay prices in this region, few farmers plan on sowing more alfalfa.
"The hay prices say that we should be planting more hay acres, but you just don't see that in the planting intentions," said Diersen. "We would need two years of alfalfa being more profitable than grains for acres to shift back to hay. This would mean maintaining our current high prices for alfalfa and corn prices dropping to $5 or less per bushel. But if corn prices were to drop, you would see more export demand for corn and more corn being utilized by the ethanol industry. Corn usage by beef feedlots would also increase."
Diersen recognizes that some dairy farmers have little choice but to bite the bullet and buy high-priced hay.
"We are caught in a perfect storm of reduced supplies due to last year's drought coupled with a late spring," he said. "In this situation, it sometimes makes sense to pay through the nose for the load or two that will get you through until you can harvest your own hay."
Gary Freeburg and his family grows 2,500 acres of alfalfa on their farm located near Gayville, S.D. The majority of the hay they raise is sold to dairy farmers.
"I am 66 years old and last year was as dry as I've ever seen it and for as long as I've ever seen it," Freeburg said. "But it was a wonderful summer for putting up hay. Almost all of our alfalfa is irrigated, so it was just a matter of turning off the water and baling it up."
Freeburg hasn't seen a lot of winter kill, but the cool weather this spring has him concerned about a few of his fields.
"Most of our alfalfa had popped up nicely, but then we got a night when the temperature dropped to 18 degrees," he said. "Most of it came through OK, but we have one particular quarter section of alfalfa that doesn't look so good."
Freeburg thinks that hay prices have gotten out of hand.
"I contracted a lot of hay last spring to our steady customers and I feel good about that. I would be tickled pink if we could sell all our hay for $180 to $200 per ton. But I don't control the market and I can't save the world. I really feel for those who have to pay these high prices. It doesn't do us any good to price our customers out of business. And without our customers, we're nothing."
One place where there will be new alfalfa growing this year is on the Haase farm.
"This spring we seeded in 120 acres of alfalfa under one of our center pivots," Haase said. "We usually save our irrigated ground for corn, but we decided we needed an insurance policy against coming up short on hay again. We also might buy some alfalfa from a neighbor to help rebuild our haylage buffer."
There is a lot riding on the hay crop at the Haase dairy operation.
"We had been making plans to expand our facilities and add more cows," Haase said. "But if we can't get enough hay or if the drought continues, we might end up selling some of our cows instead."[[In-content Ad]]


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