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0309 PD: Weather, dairy futures and economy to test growers in 2009

Darren Olsen Published on 06 February 2009

If you talk to most producers, they would love to repeat 2008 again this year. Even though inputs were high, income was also higher. Unfortunately, 2009 is going to be almost a polar opposite in many aspects. That’s the bad news. The good news is hay growers still retain the ability to harvest quality hay, price it according to their needs and market it freely to hay consumers. Hay producers are not tied directly to commodity markets that rise and fall on futures and speculation. Being in control has risks, but in a down market, control is one thing that remains a favorable condition.

There are, however, a few things that hay producers don’t have control over, and it is these that will be the biggest variables to profitability in 2009. Weather has been and will continue to be the biggest obstacle to production yields. In 2008, dry conditions persisted in the West, creating even higher tension over water use and availability.

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Looking at the year-end results from 2008, total U.S. hay production decreased nearly 1 percent. Yield and acres for both alfalfa and other hay decreased across the board. Texas remained No. 1 in all hay production but saw a huge reduction in overall tonnage because of drought. Drought in the West also accounted for California’s drop from No. 2 to No. 3 in overall hay production. Missouri took over the second spot because of higher-than-normal rainfall. 2009 looks to continue these trends according to the climate experts at the National Oceanic and Atmospheric Administration. (See inside map for details.)

Another area to watch, especially for alfalfa growers, is milk prices. 2007 and the first half of 2008 saw firm milk prices, allowing growers to sell at premium prices. Although inputs were also high, the prices received generally compensated for the increases. This, along with unusually low hay stocks headed into 2008, allowed alfalfa growers to capitalize on both quality and quantity in production.

2009 looks to be very different. Hay stocks are exactly the same from a year ago, and milk futures are pointing lower, the likes of which have not been seen for at least six years. Some dairymen may go out of business. Others will be looking to cut feed costs. Producers who get with customers earlier to determine their needs for both quantity and quality will be more successful. Suppressed demand will make meat and dairy producers more cautious.

The last unknown to 2009 will be the economy. Producers who get caught up in the gloom and doom of the situation will face an uncertain future. Financial resources will be tighter; efficiency and cash flow will be king. But markets for high-quality, plentiful hay will still exist. Producers who find them early and timely deliver a consistent product will survive and maybe even gain market share. PD

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