Historically low supplies cause record hay prices

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Source: Tim Petry, Livestock Economist, North Dakota State University Extension Service

In last week’s In The Cattle Market column, John Anderson did an excellent job of explaining the final production numbers for the US corn crop.  Another crop that is vitally important to cattle producers is the hay crop.  Hay prices have been at record high levels this year (the hay crop year runs from May through April).

Hay supplies in the US have been declining for the last several years.  Both the competition for land due to historically high crop prices, and the 2011 drought in the Southern Plains and more widespread drought in the US in 2012 were major causes of the decline.  In its an annual Crop Production Summary released on January 11, 2013, USDA-NASS  reported both state and total US hay area harvested, yield per acre, and production for alfalfa, other hay, and all hay categories.

All hay area harvested in the US at 56.26 million acres in 2012 actually increased over the 55.65 M harvested in 2011, which was historically low.  Texas and Oklahoma producers were able to harvest over 2 M more acres in 2012 with drought conditions moderating somewhat there, but were still 140,000 acres below their 2010 harvested acres.  US hay acres harvested in 2010 were 59.9 M, and going back to 2005 there were 61.7 million acres harvested.

The yield per acre for all hay in 2012 at 2.13 tons per acre was the lowest since the 1.94 T was recorded in the severe drought year of 1988.  Hay yields were 2.36 T in 2011 and 2.43 T in 2010.  All hay production in 2012 at 119.9 million tons was the lowest number since the 120.1 M reported in 1976.  And for comparison, 125.7 million tons were produced in the 1988 drought year.  Several years of declining hay production are evident, with 147.7 million tons produced in 2009, 145.6 M produced in 2010, and 131.2 M in 2011.

NASS also reports May 1 and December 1 hay stocks on US farms in its monthly Crop Production report. December 1, 2012 hay stocks were reported at 76.5 million tons, which was the lowest level on record.  Record low stocks were not surprising given the low production and increased demand for hay due to the widespread drought.  2012 stocks were 28% below the 2001-2010 average of 106 million tons.  And again for comparison, December hay stocks in the 1988 drought year were 90.3 million tons, about 13.8 M more than in 2012.

Hay prices will likely stay at historically high levels until the potential for new crop production starts to materialize.  A return to more normal precipitation patterns would certainly be beneficial to the cattle industry, not only for improved hay production but also for improving pasture and range conditions and producing a better corn crop.

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The Markets

Both fed cattle prices and choice boxed prices were lower last week. Across the 5-area market, liveweight steer prices averaged $123.93 per hundredweight, down $2.11 for the week. Dressed weight prices were under even more pressure and declined $6.34 to average $197.19 for the week. Choice boxed beef prices closed down $1.13 at $192.68. Calf and feeder steer prices traded steady to down $5 with the lower bids coming at the end of the week. Corn prices in Omaha on Thursday were up 21 cents per bushel for the week at $7.48 and distillers grain prices in Nebraska also followed the upward movement in corn.

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