(Hanford Sentinel, CA)
By Seth Nidever
The talk of the town in the local dairy industry is the high price of alfalfa hay. The basic dairy feed, an essential ingredient in the mix that keeps cows cranking out milk, is getting more and more expensive. At about $300 a ton, the high cost is squeezing profits and preventing a full recovery from the disastrous 2009 season, when milk prices collapsed and dairies borrowed millions to stay afloat, said Selma milk producer Steve Nash.
“It’s headed toward historical highs,” Nash said. “It doesn’t look good right now for the dairy business as far as feed cost goes.”
One of the main issues is overseas demand. China and the Middle East are buying up compressed hay transported in containers on ships returning overseas after dropping off their loads of consumer goods at U.S. ports.
The same overseas demand is keeping the consumer price of dairy products high, said Stanley Bell, a Hanford hay broker.
“It could keep consumer prices up,” Bell said. “The same export market that’s driving the hay price is also keeping dairy prices up.”
Analysts say it’s cheaper to ship a ton of hay from the Imperial Valley to China than to ship it from the Imperial Valley to Hanford.
“It’s unbelievable because of the number of containers that are going back overseas empty,” said Seth Hoyt, a hay market analyst based near Sacramento. “They have just lowered those overseas freight rates ... It is true.”
It costs $45 to $50 a ton to ship hay from the Imperial Valley to Hanford, while it costs about $16-$25 a ton to ship it to China, he said.
Some local dairy farmers are being outbid on hay by exporters willing to pay more.
That means farmers like Nash who have substantial acreage to grow their own crops to feed their own cows are feeling pretty lucky. Much worse off are the dairy farmers — and there are a number of them out there — who have less cropland.
The pressure is on, Nash said. Some smaller dairy farms with plenty of land to support their cows believe they might now have an advantage over some of the mega-dairies.
There’s another factor at work driving up prices — Central Valley farmers shifting away from alfalfa to more lucrative crops like almonds and pistachios.
Compounding the problem is a severe drought in Texas and Oklahoma. Dairy producers in those states are buying hay from the Central Valley, which is in the second consecutive wet year.
“They’re desperate for hay,” said Bell. “In a normal year, a lot of that hay would come this direction.”
Things in the dairy industry are starting to look decidedly abnormal. The odd thing for many producers is that the price of milk has been strong, holding in the $18 to $19 per hundred-pound range. That’s way up from 2009, when prices slipped below $10 per hundred pounds.
Often, when prices are good, dairy farmers make a lot of extra cash and use it to pay off debts from past downturns.
Not this time, Nash said.
“[2009] wasn’t like anything we’ve seen before,” he said. “It’s going to take many years to pay that off and get back to where we were in 2008.”
Nash is focused on getting as much milk as possible from his dairy cows. He and others are also planning to grow as much of their own feed as they can. Nash already gets 60 to 70 percent of his alfalfa from his own land.
But he’s worried about the future of the industry. The immediate concern is what will happen to hay prices this winter. Some have bandied around a $400-per-ton figure.
That seems too high to Hoyt.
But to farmers like Nash dealing with an industry that has lost some of its standard assumptions, anything seems possible.
“There is a shortage of hay,” he said. “There is no doubt.”
www.holsteinworld.com/story.php?id=4778 
