The cereal hay market has been doughy for months and prices are being pressured by the sales of carryover stock, so when will hay prices turn around?
Selling pressure has pushed Victorian old crop cereal hay, testing around 9.5 ME and 10% protein, down to $170 to $200 a tonne ex Wimmera Mallee farm and it appears that uncontracted new crop could slip into the same pattern. Similar sell pressure has pushed last year’s vetch hay, testing 9.5 ME and 20% protein, down to $230 to $270 ex farm. Some more weathered new crop lines are offering at $180 to $200.
Hay prices can be determined by supply and demand but at the eve of baling, supply will always be greater than demand, creating a buyer’s market. The short-term price outlook will be determined by the less predictable behaviour of buyers and sellers.
Bullish factors that could push up prices:
- While there will be some intense marketing of hay for spread delivery next year, the volume of hay trade for prompt delivery may be much less than normal
- Unlike the last two years, low hay prices have been a strong disincentive for opportunistic growers to cut crops for hay. There may be new hay growers, but most have been a part of the recent massive investment into new sheds.
- Many oaten hay growers have contracts with exporters and should manage to clear sufficient bales from their paddocks to store all remaining hay in sheds.
- Certainly, the area cut for hay will be well down this year compared to the last two years. Some weedy cereal crops may be cut for hay, but the early break has minimised these. While seasonal conditions could be better, we are unlikely to see failed crops being salvaged as hay.
- JumbukAG’s estimates of the area of Victorian cereal hay for this season are 20% above the long-term average but 23% below last year.
- Around 40% of Victorian cereal hay is exported and exporters will be chasing high quality. Competing supplies of timothy hay in the US and Canada were damaged by 50 to 130 mm of rain during May and June and stocks of high-quality hay can help exporters avoid their competing sellers of low-grade hay.
- Low prices should encourage demand and some southern dairy farmers are already scaling back silage plans in favour of buying cheaper vetch and cereal hay
- Hay exporters may get the bulk of their higher quality hay from WA as they experienced a much tighter finish to their season in 2020. Accordingly, they may be more accepting of mid-grade hay to fill their presses.
Bearish factors that could pull prices down:
- The most aggressive sellers are those with carryover stocks who are not able to store all their new crop hay.
- Demand is low. Buyers from NSW will be absent this year but there is a trickle of lingering hay demand for the drought in southern and central Qld. In Victoria livestock operators are enjoying one of the best grazing seasons for years. Few have any short term need for supplementary feed as they have low stock numbers (esp. in NSW) and plenty of silage and hay in front of them.
- Most of these buyers who enter the market at baling will be looking for a bargain. This may work well for both parties as a low ex baler price can save growers considerable resources to transport and stack hay in a shed.
- Most windrows of vetch hay have had multiple rain events on them with more to come. Quality and yields will be down, and prices will suffer
- Hay exporters are experiencing an unfavourable exchange rate 3 US cents higher year on year
- There have been no frosts yet but barley and wheat crops in the Wimmera remain most vulnerable and could increase production of cereal hay.
Hay prices are variable according to quality, freight to specific markets and just what a buyer and seller happen to agree to. The price graphs here are a representation of typical hay prices monitored over the past 8-10 years.
Those with reasonable quality hay, market contacts and sufficient storage will be looking to delay sales until autumn and winter and it seems like a worthy punt at this stage.
written for BCG by Colin Peace, JumbukAg