Column by Alvaro Garcia, SDSU Extension Agriculture and Natural Resources Program Director & Professor
Three countries lead the world in fluid milk production: India, the U.S. and China - in this order. Demand for dairy products in China continues to increase through a combination of technology, changes in retail-supply chains, consumer trends, income growth and government policies.
With limited access to land, the choice for large Chinese dairies is to import feed. All types of hay are coveted by the Chinese market, however those with high nutrient density (more than 20 percent protein and more than 150 Relative Feed Value) are definitively attractive.
From this perspective, the U.S. alfalfa market is prime for exporting to China. In 2016, the U.S. exported 23 percent more hay to China than in 2015, and was the top supplier, with 78.6 percent of the total (1.29 million metric tons), followed by Australia (13.8 percent), Spain (3.48 percent), and Canada (3.16 percent).
South Dakota is a leader in hay production
Five states produce 35 percent of all alfalfa in the U.S., they include: California, South Dakota, Idaho, Iowa and Minnesota.
During 2013-2014 California and Idaho hay stocks dropped by 56 and 44 percent, respectively. Between 2016 and 2017, and with the exception of Idaho, which increased hay production by 29 percent, all other leading states dropped production. California dropped by 58 percent, South Dakota dropped by 31 percent, Iowa dropped by 43 percent, and Minnesota dropped by 35 percent for an overall average hay reduction of negative 36 percent.
It is unlikely that hay production will rebound during 2018. Large amounts will need to be shipped from other states to supply California's livestock and exports. The U.S.
Department of Agriculture projects hay acreage for 2018 will drop nearly 36 percent from last year.
Lower corn prices have at least helped somewhat with the tough financial times U.S. dairies and other livestock enterprises are facing.
It seems that during 2018 higher hay prices resulting from reduced stocks could hamper some of these feed cost savings that lower-priced corn brought to livestock producers in the recent past.
Farms that rely heavily on hay for either growing heifers or lactating cows, may want to lock prices. Similarly, the use of agricultural by-products (and particularly corn co-products because of their current competitive price) seem to be an economical alternative.
If the commitment of the U.S. government to allow year-round sales (including the summer) of 15 percent ethanol blends (E15) is confirmed, then feed co-product prices may become increasingly attractive.
Advantages of this approach will be to strategically stretch hay supplies for the 2018-2019 winter season.