CNS Canada — Volatility on the forage market has driven alfalfa prices to all-time highs in Western Canada and it doesn’t appear they’re going to come down anytime soon, an industry expert says.
The high prices can be chalked up to a few reasons, according to Ed Shaw, owner of Carstairs, Alta.-based International Quality Forage and past president of the Canadian Forage Grasslands Association.
U.S. dairies, he said, have driven alfalfa prices to their current record marks because they’re getting more money for milk, cheese and butter. This has subsequently increased their hunger for hay.
“I think there’s a panic mode set in, that they’re going out and trying to buy anything and everything they can and worrying about the pricing later.”
Drought in the U.S. has put pressure on water tables with increased restrictions on water usage in key areas. As a result, dairy operations are competing fiercely for existing hay stocks. Arizona and California traditionally grow significant amounts of forage and have been hard hit, he said.
As for demand, Shaw doesn’t see Canadian growers falling short of supplies, but the same can’t be said for the international community.
According to Shaw, China’s consumption of forages is doubling every year, India is just starting to establish itself in the marketplace and Saudi Arabia has greatly reduced water supplies for its producers, meaning they’re going to have to import 3.8 million tonnes of forage on an annual basis.
All this leads Shaw to believe prices for alfalfa will stay firm with some slight signs of easing. But it doesn’t necessarily mean record-high prices will be realized for exports. Most of the hay that’s exported from Canada tends to be in the fibre format and not protein, he said.
The price for alfalfa “is going to stay where it’s at, I think. Because our freight is higher in Canada.”
“Next six weeks”
As far as timothy (long-fibre) hay goes, farmers can expect to see prices drop C$100 a tonne if a good crop comes off this year. A much different scenario than the aforementioned alfalfa, said Shaw.
A significant number of timothy acres in the U.S. were converted to cereal crops and oilseeds a few years ago due to pricing differences. However, last year a bunch of those acres were returned to fibre hay.
Demand for protein is increasing while demand for fibre is stable. Most of the hay that’s exported from Canada is in the fibre format and not the alfalfa format.
Hay is also coming off well in Washington and Oregon, he added, which could eventually dampen down the market if they get a good harvest.
“The next six weeks should tell us where we’re going.”
Shaw also advised producers to do their homework before selling to someone they don’t know, because “some really bad actors have surfaced again.”
Performing reference checks on both buyers and sellers is a good idea, according to Shaw.
— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.