San Joaquin Farm Bureau Federation

By Craig W. Anderson

Milk prices to dairy producers have more to do with red ink than milk as the overbase price remains at a miserably low level and the dairy farmer's woes extend to the alfalfa hay growers who aren't selling enough hay to stay out of the red.

According to alfalfa market specialist Seth Hoyt, dairy farmers require milk prices in the $15 to $15.50 per hundredweight (cwt) to break even financially. But California's overbase milk prices in March were in the $14.15 per cwt range and it was even worse in April when the price slumped to $13.92 cwt.

Sour situation for hay

"In 2016 it wasn't profitable to grow hay," said Rick Staas, San Joaquin Valley Hay Grower's Association agent. "There was no profit in hay at all as depressed dairy prices soured the market."

Staas noted that alfalfa hay had a late start "this year in the valley and additional fields were lost to flood and a high water table in the Delta. The slow market is a combination of the depressed dairy sector and hay growers going to trees looking for a long term profitable crop."

According to the CDFA, the overbase price for the same two months was $12.90 in March and $12.61 in April. Hoyt, author of The Hoyt Report alfalfa and forage newsletter, said, "At this point for some dairymen it's not so much about gaining more pounds of milk production, it's about survival."

The near past

Some growers are in their third cutting with good yield and protein values for the dairy market but the start has been slow. That's preferable for those growers who, from 2012 to 2014 had no crop because of the drought with 2015 and 2016 being fair, not good, years.

"There were some issues regarding flooding of alfalfa hay fields which has affected supply," said Tim Pelican, San Joaquin County Agricultural Commissioner. "And some dairy farmers had enough residual left over to use in their feed mix."

Hay prices

With feed prices of top quality hay in the $230-$240 per ton range and bottom quality going for $160 -  $175, Staas said, "There's very little high quality hay available but if the price can be maintained at $20 or $30 or $40 above last year's prices, we'll be OK. The demand is still there but there's less product."

Staas said he expects a scramble for supreme alfalfa all year long.

Reasons for fewer alfalfa acres

The reasons for fewer alfalfa feed tonnage is attributable to a number of factors, including, Staas said, "People jumping into beans and with the wet weather, not a lot of bean acreage got harvested. Also, about 60 percent of our members have diversified and planted significant acreage to trees feeling permanent crops like almonds and walnuts will give them stability when they begin producing crops."

Of course, the assumption is that the excellent prices nut crops have been garnering the past few years will continue into the future, weathering drought or floods.

China and culls

Should feed become a seriously negative aspect for dairy farmers, selling some dairy cows into the beef market might be a way to thin their need for feed while taking advantage of the new agreement with China that is allowing the reintroduction of USA beef to the country. Increased beef shipments to China could create a profitable market for dairy culls. "This is something that didn't exist during the drought when thousands of dairy cattle were going into the beef market," Pelican said. "It could be a viable market for those who want or need to use it."

Cutting costs

What have hay growers done to cut costs to deal with the dismal 2016 hay prices? A survey done by UC Cooperative Extension farm advisor Steve Orloff and alfalfa and forage crops specialist Dan Putnam revealed, said Putnam, "The number one answer was to purchase less equipment, which didn't make the equipment dealers very happy."

Commenting on their research at the California Alfalfa & Forage Symposium, the duo said it demonstrated how when one major agricultural sector has problems a larger segment of the industry can feel the effects, good and bad. Orloff said, "The slump could present opportunities for those growers who can work out the finances to get some great deals."

Yield adjustments and more

The survey also disclosed that growers sacrificed yield in favor of quality by cutting their alfalfa earlier than usual; number three on the list of budget-saving choices was not to plant new alfalfa fields at all and to abandon field already slipping as they neared the end of their productive lives; next was a large number of growers who chose to reduce or eliminate fertilizer applications.

Eliminate fertilizer…not good

The researchers recommended going to a lab to learn the consequences of eliminating fertilizer because, said Putnam, "Soil and/or plant tissue testing is the best way to know if you could afford to cut back on fertilizer. And when considering a fertilizer application, the yield response should obviously at least justify the cost of the application."

Weed control vital

Growers agreed that it's not wise to try saving money on weed control, which can hurt hay quality in a market where quality is a real premium. "Clean hay pays in a down year," said Putnam. "You need to have weed control in a down year."

66 percent of growers responding to the survey didn't alter their weed control program despite low hay prices, Putnam said, adding that "most growers recognize the importance of effective weed control."

Feed ratios

Another way dairies reduce production costs is to reduce the amount of alfalfa hay in cow rations which has been done for a decade in California. In 2004, dairy farmers fed about 12.5 pounds of alfalfa hay to every cow per day annually. By the third quarter of 2016 the amount of alfalfa fed had fallen 37 percent to 7.9 pounds per head. "Dairies have been adjusting hay in the feed mix ration but not eliminating it," Staas said. "Hay is an important protein source and I think most dairy farmers would prefer to feed their cows more hay." And if hay is scarce or too expensive in California it comes in from Oregon, Utah, Idaho and Nevada, Staas said.

How to improve alfalfa hay prices

What would lead to an increase in alfalfa prices? Higher milk prices would be the first choice because that would mean dairy farmers and alfalfa growers would be in their happy spaces; continued alfalfa acreage shrinkage and higher western-state alfalfa hay exports to China and Saudi Arabia, according to Hoyt.

Acreage drop-off

Alfalfa acreage has fallen from more than 1.1 million acres in 2006 to 720,000 acres in 2016, a drop of 37 percent. The reasons include: more price-competitive crops such as tomatoes and almonds, the impact of the severe half-decade of drought, and pistachio and walnut plantings. "As long as almond and pistachio growers are making money they'll keep planting trees," explained Hoyt. "Even though it's a permanent crop, the positives of tree nuts include using less water to grow a crop."

Exports as savior

Exports could boost almond prices but Chinese dairies, which aren't subsidized by the government any longer, offered less money for alfalfa hay in September 2016 due to low milk prices that created a stalemate between Chinese buyers and West Coast exporters and that caused a decline in shipments to China late in 2016. However, China exports increased markedly in February.

And U.S. hay shipments to Saudi Arabia are expected to grow because of the government's ban on using the country's water to irrigate crops.

As with most things agricultural, dairies and alfalfa growers are affected by the ebb and flow of weather, costs, customers and, in some instances, pure luck.