Western dairy producers, especially those in California, have been squeezed by high feed prices; perhaps none more than those for alfalfa hay. With the state's ongoing drought, competition from other crops and burgeoning export sales, alfalfa hay prices reached historic levels. At least when it comes to alfalfa exports, there are indications those sales and perhaps prices might be moderating.
Chinese alfalfa exports had grown eightfold from 2009 to 2013 and reached 785,000 tons, according to USDA statistics. As those sales escalated, much of that hay left our nation's Pacific shores and filled once empty shipping containers headed back to China. While those newfound sales where welcomed by alfalfa growers, it left Western dairy producers with higher feed bills.
The alfalfa sales trend has moderated as of late, with the Chinese government placing the breaks on alfalfa imports over concerns of biotech genes - mainly Roundup Ready alfalfa. As a result, alfalfa exports to China were off 22 percent from August to October alone, according to USDA data.
What does the future hold?
Of course, Beijing could reverse course at a moment's notice and allow gene-spliced alfalfa back onto its shores. In the meantime, there should be a slightly softened demand for alfalfa that would cause prices to shift downwards. This would be welcomed news to Western dairy producers who have had their hay budgets busted by high priced hay. However, the third consecutive year of California's severe drought will continue to place a floor under the Western hay market. That would ease with strong snowfall in the Sierras this winter.
(c) Hoard's Dairyman Intel 2015
January 5, 2015