Hay shortage impacts dairy profits

FORT ATKINSON, Wis. — U.S. hay stocks decreased in 2022.

“We’re not at the record lows we saw in 2007, 2013 or 2019, but we’re getting close to that level,” said Mike Rankin, managing editor of Hay & Forage Grower. “There is not as much hay in the barn as we had from 2015 to 2017.”

“The U.S. Department of Agriculture is forecasting alfalfa hay production to be down 1% from last year and grass hay down 11%,” said Rankin during a webinar hosted by Hoard’s Dairyman. “A lot of that is related to the drought situation in the Central and Southern Plains, where they grow a lot of grass hay.”

The September average alfalfa hay price is record high this year, Rankin said.

“And we thought it was high last year,” he said. “There has been over $100 movement upward in the last two years.”

For supreme and premium quality alfalfa hay, the price is at $342 per ton, the speaker reported.

“This year, the lowest hay prices seem to be in the Midwest states,” Rankin said.

“There is no reason to think hay prices won’t stay high since drought has become the norm in many areas of the west,” he said.

“It is true again this past year, so it’s going to take more than one above-average year to bring them out of drought and that’s going to keep hay prices high in the western U.S.”

Another reason for higher hay prices is strong exports, especially to China.

“China is taking over 50% of our total exports,” Rankin said.

With high input costs, making hay is going to cost more.

“Fertilizer prices have leveled off a little bit and in some cases down a little, depending on what sources you’re looking at,” Rankin said. “But we still expect fertilizer prices to remain high going into the next growing season.”

The good news for dairyman, Rankin said, is seed supplies will be improved relative to last year.

“They didn’t have the extreme heat in the west where a lot of the forage seed gets produced, so overall it was a better seed growing year than last year,” he said.

However, sorghum seeds may be more difficult to purchase this year.

“A lot of these are getting used more frequently on dairy farms across the U.S. as summer annuals,” Rankin said. “If that’s in your program, you may want to talk to your seed supplier to see where those stand.”

Both dairy and beef herds aren’t growing much, Rankin said.

“That could be bearish for hay prices if hay production makes a comeback in 2023,” he said.

Influential Factors

“For forage quality, particle size is the key in fragility or how strong the fiber is,” said Mike Hutjens, University of Illinois professor emeritus, who also spoke during the webinar.

“For legumes, grasses and small grains, I want them to be over 50% neutral detergent fiber digestibility,” he said. “That represents the digestibility of the cell wall which is energy for the rumen microbes.”

Hutjens talked about some of the factors that are impacting grain prices.

“World grain supplies are looking at Ukraine and Russia, inflation and the strong U.S. dollar,” he said. “And it looks like Brazil is sitting on a big soybean crop.”

In the United States, there has been less ethanol production due to the high gas prices and there are problems moving grain due to the low levels of water on the Mississippi River.

“Fuzzy cottonseed is a challenge because west Texas was really dry and most of that cotton is not irrigated,” Hutjens said. “We will see pretty strong prices on fuzzy cottonseed for the rest of the year.”

High-producing dairy cows are the most efficient and profitable, Hutjens said.

“You only have one chance to set the lactation curve and peak milk for the next 300 days of milk production,” he said. “So, don’t restrict the good cows.”

Hutjens provided an example with feed costs at 16 cents per pound of dry matter and the milk price at 24 cents per pound.

“The last pound of dry matter the cow consumes will produce two-plus pounds of milk,” he said. “So, it costs you 16 cents to get 48 cents, which is profitability of 32 cents per cow per day.”

Hutjens advises dairymen to look at the feed efficiency of their herd.

“Most Illinois herds are between 1.4 and 1.5 feed efficiency,” Hutjens said.

“If you keep milk production constant at 70 pounds and the dry matter intake goes from 54 to 46.6 pounds per day, you’ll have an extra 54 cents profit per cow per day,” he said. “That’s big numbers.”

Every Illinois dairy farmer, Hutjens said, should enroll in the Dairy Margin Coverage program.

“I don’t care if you have 120 cows or 1,000 cows, you better protect some of your milk,” Hutjens said.

“Forage quality and quantity are key for 2023, so monitor the forage quality because there are some tremendous ranges,” he said. “And evaluate the regional byproduct prices and values.”