St. Louis, Missouri, USA
July 24, 2017
lobal forage demand is seeing a significant escalation, leaving U.S. alfalfa and other hay producers in a good position and U.S. dairy producers searching for alternatives. In a new report from the RaboResearch Food and & Agribusiness group, Dairy Analyst, James Williamson explores the source of the demand.
The report, “Foraging for Higher Prices,” finds seven states, Arizona, California, Idaho, Nevada, Oregon, Utah, and Washington, produce 18 percent of U.S. hay and nearly 90 percent of U.S. hay exports.
Throughout 2015 and 2016, lower milk prices, coupled with weather-related forage quality issues, resulted in building hay stocks and downward pressure on hay prices.
“This downward pressure on prices isn’t the end of the story,” notes Williamson. “We’ve seen the top six hay importers – responsible for buying over 95% of U.S. hay exports –increasing their import volumes and paying a premium for higher-quality hay, supporting prices at their current levels. As a result, prices will likely continue moving in an upward trend.”
The higher prices are having a significant impact on California dairies. Due to water constraints, hay production in California has decreased by a third since 2008. Producers are forced to pay higher prices and look to alternative sources.
“Water restrictions aren’t limited to California,” adds Williamson. “Increasing pressure to conserve water resources around the world, specifically in areas such as Saudi Arabia, will continue to drive demand alfalfa and other hay. This is going to be the new normal.”
About Rabobank International RaboResearch Food & Agribusiness
Rabobank International RaboResearch Food & Agribusiness is a global team of more than 80 analysts who monitor and evaluate global market events that affect agriculture worldwide. This international team works to collect key insights into commodity markets; conduct in-depth analysis of the factors that drive sector success (or failure); and examine the megatrends that ultimately influence clients’ business strategy. These analysts are internationally respected experts in sectors from protein to produce, inputs to oilseeds, and their knowledge is shared with Rabobank customers.
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