2008 Washington State
Hay Situation and Outlook
J. Shannon Neibergs1, William T. W. Woodward2
and Phil J. Peterson3
1,3
WSU Extension and 2Columbia Basin College
...Challenges...
Facing Agricultural Producers




“Fight for Food or Fuel”
Structural Change in Supply Response
Globalization
Marketing
Light Crude Oil (CL, NYMEX)
Monthly Price Chart
Monthly Buy – Sell and Reinvest
Hypothetical $100,000 Investment
Light Crude vs WA Alfalfa Hay
2006
$
ROI %
$5,630
5.6%
Alfalfa Hay $17,391
17.4%
Light
Crude
2007
$
ROI %
Monthly Buy – Sell and Reinvest
Hypothetical $100,000 Investment
Light Crude vs WA Alfalfa Hay
2006
2007
$
ROI %
$
ROI %
$5,630
5.6%
$42,941
42.9%
Alfalfa Hay $17,391
17.4%
$21,739
21.7%
Light
Crude
2007 California Drought Increases Forage Demand
WA Acres Harvested
Figure 1 WA All Hay Acres Harvested
1000 acres
850
All Hay Acres up
20,000 acres
+2.6%
800
750
700
650
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007*
Years
1000 acres
Figure 2 WA Alfalfa Acres Harvested
520
500
480
460
440
420
400
380
Alfalfa Acres down
10,000 acres
-2.3%
1997
1998
1999
2000
2001
2002
Years
2003
2004
2005
2006
2007*
WA Hay Production and Yield
Figure 3 WA All Hay Production
3,800
1000 tons
3,600
All Hay up
173,000 tons
+5.6%
3,400
3,200
3,000
2,800
2,600
Yield tons
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007*
3.95
4.21
4.13
4.17
3.91
4.07
4.45
4.29
4.34
4.04
4.21
Figure 4 WA Alfalfa Production
3,000
1000 tons
2,500
Alfalfa up
80,000 tons
+3.7%
2,000
1,500
1,000
500
0
Yield tons
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007*
4.80
5.00
4.90
5.00
4.80
4.90
5.30
5.00
5.20
4.90
5.20
USDA Annual Alfalfa Cash Price
Hits Record High in 2007
USDA Annual Average WA Alfalfa Price
1970 to 2007
160
140
$138
$ per ton
120
100
80
60
40
20
0
70 972 974 976 978 980 982 984 986 988 990 992 994 996 998 000 002 004 006
19
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
2
2
2
Cash Price
USDA Annual Average Price Cash
versus Deflated Prices
USDA Annual Average WA Alfalfa Price
1970 to 2007
160
140
$138
$ per ton
120
100
80
Cash Price
$67
60
40
20
0
70 972 974 976 978 980 982 984 986 988 990 992 994 996 998 000 002 004 006
19
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
2
2
2
Price deflation index, 1982 = 100
Deflated Price
2007 PNW Hay Supply Statistics
Small Change from 2006 to 2007
Acres
Production
All Hay
Alfalfa
acres
3,290,000
2,030,000
change tons
(2006 to 2007)
-50,000
-20,000
% change
(2006 to 2007)
-1.5%
-1.0%
tons
11,679,000
9,116,000
change tons
(2006 to 2007)
-410,000
-6,000
% change
(2006 to 2007)
-3.4%
-0.1%
Dairy Cow Geographical Concentration
Continued Growth in Idaho and California
Cow Numbers
Growth in Dariy Cow Numbers
(1,000 cows)
70
61
63
60
59
50
40
40
37
30
30
25
25
OR
CA
20
10
0
2000
-10
-20
WA
ID
2001
2002
2003
2004
2005
2006
2007
2007 Milk Price Reaches Record High
2007 USDA AMS Northwest Mailbox Milk Price
$25.00
$20.86
$21.00
$21.48
July
Aug
Sept
$19.37
$20.00
$17.40
$15.91
$15.00
$12.60
$13.84
$13.93
$14.79
$10.00
$5.00
$0.00
2006
avg.
Jan
Feb
Mar
April
May
June
2007 Milk Price – Record High
http://www.ams.usda.gov/dairy/mncs/graphs/DY20070105aClassIII.pdf
The Feed Pyramid for Dairy Cows
http://www.extension.umn.edu/dairy/dairystar/05-12-07-Paulson.htm
California is clearly a hay deficit state
2007 Index of Dairy Demand for State Hay
162
180
160
140
120
100
66
69
80
40
60
40
20
0
Idaho
Washington
Oregon
California
Index roughly estimates the percent of a states alfalfa hay production consumed by dairy cows
Idaho’s index has increased from 46
in 2000 to 66 in 2007.
Other Domestic Demand Factors
January 1 Cattle and Calves Inventory
5,000
4,500
Steady beef cattle and
Calves January 1 inventory
4,000
1,000 head
3,500
WA
3,000
OR
2,500
ID
2,000
PNW
1,500
1,000
500
0
2000
2001
2002
2003
2004
2005
2006
2007
Horse Numbers Unknown
but Willing to Pay
for Quality Hay
Exports
Year to date Pacific Rim Hay Imports
From ALL countries
Pacific Rim Total Hay Imports
January to November
3,500,000
metric tons
3,000,000
2,500,000
Taiwan
2,000,000
Korea
1,500,000
Japan
1,000,000
500,000
0
2000
1.
2.
3.
4.
2001
2002
2003
2004
2005
2006
2007
2007 YTD total Pacific Rim imports are 99% of 2006
Japan small decrease offset by Korea increase
USA captures 91% of Korean increase
Not shown by graph, but in the data USA exports increase
83,427 metric tons from ’06 to ’07 – a 4% increase
West Coast Forage
Exports to Pacific Rim
PNW vs PSW
Metric Tons
2500000
2000000
1500000
1000000
59%
69%
64%
65%
41%
36%
31%
500000
35%
0
2003
2004
2005
Years
PNW
Source: Port of Portland
PSW
2006
Exchange Rate Trends
Exchange Rates - Foreign per U.S. 1$
160
140
120
100
80
60
40
20
0
Yen
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
Loonie
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Japanese Yen
Canadian Loonie
* 2007 Year to date to September
Note “strengthening” of the Loonie and relative “weakening” of the Yen
China’s Emerging Alfalfa Demand
China as a Hay Export Destination
2008 Hay Outlook
Ethanol Plants - Last update: 11/15/2007
Current Production 7,195 Mil. Gal. Expansion Capacity 6,960 Mil. Gal.
http://www.card.iastate.edu/research/bio/tools/ethanol.aspx
All Hay Stocks and Production
Washington end of year stocks are tight – PNW stocks are very tight
Year
2000
2001
2002
2003
2004
2005
2006
2007*
Washington Stocks
PNW Stocks
May 1 Production
Dec 1
May 1 Production Dec 1
1000 tons
165
3,249
1,303
550
11,559
5,859
195
3,088
1,513
694
11,078
5,982
170
3,336
1,600
797
12,117
6,974
285
3,603
1,620
1,260
12,125
6,749
470
3,392
1,560
1,286
12,366
6,708
322
3,210
1,475
1,219
11,732
5,525
250
3,349
1,339
835
12,507
5,754
240
3,286
1,385
740
11,679
5,485
http://www.nass.usda.gov/Statistics_by_State/Washington/Publications/Agri-facts/agri2may.pdf
Monthly Price Trends for WA Alfalfa Hay
Washington Alfalfa Monthly Price Seasonality Trends
160
150
2007
140
$ per ton
130
2006
120
110
Average
100
90
80
70
60
Jan
Feb
Mar
Apr
May
Jun
Jul
1996 to 2005 average
Aug
2006
Sep
Oct
Nov
2007
• Consistent June price spike
• Continually increasing price trend since 2006
• $15 per ton increase in 2006 and $25 per ton in 2007
Dec
California is the Price Leader in the Hay Market
Intermountain Areas
15% California Production
2-5 fall dormancy rating
3 cut system
Sacramento Valley
11% California Production
4-9 fall dormancy rating
6-7 cut system
San Joaquin Valley
50% California Production
7-10 fall dormancy rating
8 cut system
Low Desert Regions
23% California Production
8-10 fall dormancy rating
8-9 cut system
http://alfalfa.ucdavis.edu/#acreages
Comments and Questions