Demand for hay escalates in the dry
THE massive demand for hay destined for the northern drought-affected markets appears to be ongoing, extending well into spring and there is increasing speculation over the price of new crop hay.
Grain growers, particularly in southern New South Wales, are considering their wheat and barley crops as potential hay crops.
Logic would suggest the availability of new crop hay production would weigh on prices and pull values down.
However, in 11 of the past 19 years, prices have risen from the winter price patterns once new crop hay becomes available in October/November.
Historical hay prices also illustrate how new season hay prices are impacted by dry growing seasons.
Over the same 19 years, hay prices rose either during spring or shortly after in seven of the eight below-average winter growing seasons.
Since the poor growing season of 2014, drought-stressed cereal crops were cut for hay.
In 2014, hay prices initially fell $160 a tonne from the winter peak of $310 a tonne delivered to the dairy farms in the Goulburn Valley and recovered to $190 a tonne in March, 2015. This suggests that hay prices may not reduce much in spring and if they do, they may not fall substantially in this below-average rainfall season.
Each grain grower has a different willingness to cut crops for hay. Crop biomass varies markedly but if a Riverina wheat crop was to yield two tonnes a hectare of grain worth $350 a tonne on farm, it may also cut four tonnes a hectare of hay.
Allowing for additional harvest costs for hay, a possible break-even price for hay could be $175 a tonne ex farm.
Apart from the relative hay and grain yields their paddocks may produce, growers will also weigh up the risks of cutting crops for hay.
There are quality and price risks that can impact hay due to rain during curing and while in storage.
These risks and the additional marketing risks will elevate expectations for hay prices well beyond the break-even prices for grain crops.
The long-distance truck operators who regularly deliver road train loads of hay to western NSW and western Queensland suggest the demand for hay will continue this spring.
These carriers have been transporting South Australian and Victorian cereal hay in equal portions to producers and beef feedlots in western Queensland for more than 12 months.
Oaten hay is particularly valued in saleyards and for breeders while a smaller volume of lucerne or vetch hay is imported into Queensland as an introductory ration for cattle new to beef feedlots.