Economic Tidbits

Shrinking Hay Stocks

U.S. and Nebraska hay stocks are shrinking. The USDA reports Nebraska hay stocks in May were down 58 percent compared to May last year (Figure 1). Stocks nationally were off 13.4 percent, falling to levels not seen since 2013 according to the Daily Livestock Report (DLR). Only Colorado (71 percent) and Florida (60 percent) experienced bigger declines than Nebraska since last May. Derrell Peel, a livestock economist at Oklahoma State University, notes Nebraska’s current hay stocks are 52 percent below the average May stocks level between 2012-2021. 

The dwindling stocks, of course, are the result of drought-induced production losses. Nebraska hay production in 2022 was down 26 percent while alfalfa production was off more than a third. Peel reports U.S. hay production last year was the lowest on record since data began to be collected. Peel also notes drought-impacted states, like Kansas, Nebraska, Oklahoma, and Texas, account for 21 percent of total U.S. hay production. Thus, the drought, through hay markets, is having implications well beyond the most severely impacted areas. 

FIGURE 1. PERCENT CHANGE HAY STOCKS, MAY 1

Source: Livestock Marketing Information Center

One market implication is rising prices for hay and alfalfa. Figure 2 plots Nebraska price indices for hay and alfalfa since January 2011. The base for comparison is average price between 2007-2010. Values above 100 indicate higher prices relative to the base period. Since January 2022, hay prices in Nebraska have increased 37 percent while alfalfa prices have risen 41 percent. Current price levels, especially for alfalfa, have not been seen since the drought in 2012-2013. Prices nationally are showing similar increases. According to DLR, average hay prices nationally have been above $170 per ton since August 2022 and alfalfa prices have exceeded $260 per ton since July of 2022. 

Higher hay and alfalfa prices mean higher costs and lower margins for Nebraska’s cattle feeders, dairy producers, and cow-calf producers. But Nebraska is also a large hay and alfalfa producer. Nebraska ranked tenth in hay and seventh in alfalfa production in 2022. For hay and alfalfa producers, lost revenue from production shortfalls could be partially offset by higher prices. Still, both producers and users of hay and alfalfa would probably prefer the drought pass and a return to more typical production, stock levels, and prices.

FIGURE 2. PRICE INDICES FOR HAY AND ALFALFA IN NEBRASKA

Source: Livestock Marketing Information Center

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