High prices for competing feeds, tight hay supplies and a growing export demand resulted in a profitable 2012 for most hay growers in the region, according to the latest report from the Northwest Farm Credit Services in Spokane, Wash.
The latest information from the credit co-op is in the bank's Northwest Farm Credit Services Knowledge Center's Hay Market "Snapshop" survey.
The outlook for this year remains promising, the bank notes, but uncertain. The hay performance this year in the Northwest will be strongly influenced by dairy industry profitability, according to the report.
Nationwide drought influenced the Northwest hay market in 2012, the report adds. Production of hay, corn and soybeans was down, while dry conditions stressed range and pasture land. The spike in corn and soybean prices this summer drove demand high for quality alfalfa as a substitute feed, while dry conditions in the Northwest bolstered demand for feeder hay.
Increased demand was met with tight supplies.
Alfalfa production in the Northwest was down in 2012, driven by lower yields, the bank reports.
The financial health of the dairy industry is a primary driver of the hay market. Although dairy profitability was challenged by the high cost of feed last year, tight hay supplies and few alternatives limited dairy buyers' ability to negotiate lower prices.
In the export market, strong demand helped offset weaker demand from the dairy sector, NFCS says. Northwest hay exports were on a record pace as of October – the most recent data shows. Although Northwest hay exports typically exceed those from California, from June-September California exports bested Northwest shipments of hay.
The shift was due in large part to a lack of containers and freight capacity in the Northwest that is placing a high premium on export cargos.
Sustained dairy industry weakness in 2013 will place a downward pressure on hay prices, the bank predicts, but notes that the export market is poised for additional growth, while buyers are increasingly price sensitive.
Noncompetitive shipping costs via Northwest ports may see California remain the growth leader in hay exports.