Demand for hay from drought-stricken livestock farmers south of the border may drive up the value of this year’s crop, exporters say.
Landon Friesen, who along with his father Phil and brother Derek run Southman Alfalfa Producers near Crystal City, said that severe drought in the Midwest has sent U.S. customers scrambling for hay.
“We’ve had guys come up from South Dakota and Wisconsin who looked at our hay and said they wanted the whole shed,” said Friesen. “It’s unbelievable right now.”
He recently sold some high-quality dairy hay with a relative feed value score of 207 for $260 per short ton in their yard, well above last year’s price of $180-$200/ton.
“We’re looking at about $1.20 per RFV point right now,” he added.
His contacts in Saskatchewan have said that farmers there are “baling everything and sending it south,” and he expects that local beef cattle operations will try to hold on to whatever hay they’ve been able to put up. Beef hay buyers looking for alfalfa to grind with rations don’t typically start sniffing around the market until later in the season, he added.
Ninety-nine per cent of Southman’s sales are going south where many buyers are “desperate” for hay, said Friesen.
Apart from the drought, record-high commodity prices have exacerbated the dwindling supply situation as more forage growers on both sides of the border tear up alfalfa to seed corn and beans.
Last year, they hayed 2,000 acres, but this year they have only 1,000. First and second cuts yielded well, and the third cut looks good, too.
“It’s been pretty ideal,” he said.
Darren Chapman of Chapman Farms near Virden, said that he has been getting a few more calls than normal for this year’s hay production, which has been “average” so far.
“A lot of the guys in the centre of the drought in the Midwest have told all their customers in the dairy or horse hay market that they aren’t going to be able to supply them like they usually do,” said Chapman. “So, they are going to have to start looking elsewhere.”
Eastern Canada is dry, too, and Chapman has had calls from as far afield as Quebec from buyers and brokers scouting out hay supplies.
Chapman, who deals mainly in small and medium square bales, has been getting anywhere from six to 12 cents per pound for alfalfa, depending on quality.
High commodity prices have been dragging the price of forage up, he added.
Production has been “average” so far, with good moisture conditions through May and June. Lately, the rains have stopped coming and that could affect the third cut.
Chris Kletke, a forage grower from Brunkild, said that this year’s crop was “poor” due to lack of rain.
His production is down by 40 per cent, even though good yields were seen to the north and south.
“There was barely enough for annual crops and not nearly enough for perennials,” he said, adding that in July he got just barely over an inch of rain.
The regional nature of the drought may temper forage demand down south, he said, noting that parts of Wisconsin have had a bumper crop of hay while other parts have seen their production halved just like his own.
The spotty rainfall picture will make nailing down the price of hay even more difficult than it usually is, Kletke added.
“It’s a different animal this year. Last year, the only thing that created demand in the Midwest was the vacuum created by guys shipping hay to Texas and Oklahoma. But this year, they had an OK hay crop,” he said.
Jake Heppner, an alfalfa grower near Altona, said that he has had calls from brokers as near as South Dakota and as far away as Idaho.
His first cut was good, but the second cut and the coming third could use a bit more rain.
“The first cut was close to normal tonnage-wise,” he said. He’s pricing his crop at around seven cents a pound, or $140-$150 per ton for an RFV of around 140-150.
Demand from the U.S. could push local hay prices up, but the ceiling for dairy hay prices depends on the price of milk down south.
“If they have to pay big dollars for feed, herds get culled. So there is a limit to what they are willing to pay,” he said.
Hay sellers who hold off for later may get better prices, but overall, Heppner doesn’t expect an “overly drastic” increase in the price of hay.