U.S. drought boosts American demand — and prices — for Prairie hay

Increased demand from American livestock feeders for Canadian forages should keep domestic prices firm, according to provincial forage specialists.

While most of Western Canada has relatively good forage stocks, some areas are short on supply and will face high prices because of U.S. demand fuelled by this year’s drought.

Forage prices are generally up by 30 to 40 per cent from year-ago levels, said Glenn Friesen, a provincial forage specialist with Manitoba Agriculture, Food and Rural Initiatives.

U.S. buyers are focused on areas near the border, but will start purchasing hay from northern areas as well if they get desperate, said Friesen. Volumes heading south will be relatively small — likely a “couple hundred thousand tonnes” — but that will be enough to keep prices high, he said.

In Manitoba, forage yields were average to below average, he said. Supplies are particularly short in the southeast corner, while more minor shortages were seen in south-central Manitoba into the Interlake and on some of the sandier soil areas of the southwest.

Around Lake Manitoba, where fields were flooded out a year ago, producers had smaller reserves and are now needing to bring some hay in from elsewhere, said Friesen.

Some producers who are short on feed are reducing the size of their herd, he said. However, many are hoping for a mild winter so they don’t have to buy high-priced feed.

“They feed more expensively when it gets cold,” Friesen noted.

Forage is also moving out of Saskatchewan, which is a relatively new thing for that province, said provincial forage specialist Lorne Klein.

The U.S. drought has boosted demand, but another factor is that truckers bringing supplies to the province’s oilpatch are looking for freight to haul back south, he said.

American buyers are primarily looking for alfalfa in big square bales, said Klein. He said he’s heard that hay is fetching as much as $140 a tonne, a sharp increase from the $90 being offered last year. Even with those higher prices, he expected to see more hay move to the U.S. in 2012 than the previous year.

“Even though the majority of buyers in the U.S. would prefer to have the big square (bales), they are buying the big rounds — because they just have to,” said Klein.

By spring, there will be little carry-over of hay in Saskatchewan — especially in the south, he said. But Klein said U.S. demand could be short lived as high feed costs may lead to herd reductions or force some feeders out of business.

While Saskatchewan’s yields were average to above average, there are some areas where forage is in short supply.

Alberta also had “for the most part, some pretty good crops,” said provincial forage specialist Grant Lastiwka.

He said quality was better than in the past two years, as moisture conditions were good, while the heat and humidity resulted in good second growth, and even third growth in some parts of the south.

The Peace River area, the extreme north, and the southwest were drier, and production was hindered as a result. However, cattle numbers are not as large in those areas and large greenfeed crops were making up for any shortages. There is good carry-over inventory from the previous year in eastern Alberta.

American forage buying in Alberta has so far been less than expected, but is forecast to increase once Manitoba and Saskatchewan supplies are drawn down. International demand for forage is also expected to increase in the coming years, he said.

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Phil Franz-Warkentin - MarketsFarm

Phil Franz-Warkentin writes for MarketsFarm specializing in grain and commodity market reporting.

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