Alfalfa hay prices may have improved from where they were two years ago, but with California dairies continuing to struggle financially, growers of the forage say they remain wary about the crop's long-term prospects.
As with many of the state's other crops, alfalfa harvest this year has been slowed by the cool, wet weather. Late spring rains have wrecked some harvested hay, while flooding has damaged some root systems, setting back early cuttings, said Dan Putnam, an alfalfa and forage specialist at the University of California Cooperative Extension.
Weed infestations also have been difficult to control in some fields, he said, because water has prevented growers from getting into them. Altogether, these problems could lower the state's overall production for the year, Putnam added.
California alfalfa acreage has already been declining in recent years, with last year's harvested acreage of 620,000 the lowest on record, according to the U.S. Department of Agriculture.
"It's not likely to bounce back so quick," Putnam said, pointing to the increased plantings of permanent crops that have become more profitable for growers.
Even with alfalfa hay prices "reasonably good" this year compared to other agronomic crops, he said he doesn't expect state acreage will increase too much. But higher prices will attract some growers, he added, simply because "so many other crops are not very profitable right now."
Though he's been growing alfalfa for years, Yolo County farmer Jeff Merwin said he has reduced more than 45% of his acreage in recent years, replacing it with winegrapes and seed crops. And he's not alone. He noted some of his neighbors have gotten out of the alfalfa business completely, while others have expanded into winegrapes, vegetables and other crops that generate a better return.
"Farmers gravitate towards what makes money," he said.
Merwin noted that up until about 10 years ago, alfalfa was still considered a "big cash crop," but not so much anymore. One challenge he faces with the crop, he said, is that his fields are sprinkler-irrigated, which is labor-intensive. With state minimum-wage increases, changes in agricultural overtime rules and other production costs rising, he said alfalfa has become too expensive to grow. And dairy customers—still the primary market for alfalfa hay—"certainly aren't looking for high-cost hay," he said, because they can't afford it.
"We're on the other side of that in that we can't afford to grow it for less than a high price. And we have options," Merwin said.
Though premium alfalfa hay fetches about $250 a ton these days, he said prices need to be as high as $300 a ton to be "worth it" for him to grow. Once prices drop to about $150 a ton, farmers tend to back off from planting alfalfa, he added.
"If you can hit the premium target, you could still get a reasonable price per ton for your alfalfa, but if you miss it, the price drop is pretty precipitous," Merwin said.
What has helped lift prices is expansion into foreign markets, Putnam said. He estimates about 17% of the alfalfa produced by the seven western states—California, Arizona, Nevada, Oregon, Washington, Utah and Idaho—is exported, with China, Japan, Korea, Taiwan and Saudi Arabia being major buyers.
"For hay producers, particularly those in the Imperial Valley and the Intermountain area, exports have been a welcome relief, as we've had so much profitability problems on our dairies in California," Putnam said.
Hay shipments to China, however, have cooled after the country imposed retaliatory tariffs last summer on a list of American products in reaction to ongoing trade disputes with the U.S. Some of that lost business, Putnam said, has been offset by growth in the Saudi Arabian market, which he estimates has the potential to reach 4.7 million metric tons per year. California, he noted, produces about 5 million to 5.5 million metric tons a year.
Though much of the hay exported to Saudi Arabia currently comes from the U.S., with some California farms producing primarily for that market, other countries are jumping in, Putnam said. U.S. competitors may also try to take advantage of the opportunity in the Chinese market in light of the tariffs on U.S. hay. Even with these caveats, Putnam said he expects California hay exports will continue to grow and that demand in China is long term.
San Joaquin County grower Bob Ferguson acknowledged the export market has been "a nice outlet to move hay," but he said the shuttering of local dairies leaves him wondering about his own future growing alfalfa. For now, he has kept his alfalfa acreage about the same. Current prices aren't bad, he said, but supplies have been slower to move, especially hay that's not top quality, as dairy farmers have become "very creative with how they blend" their rations.
"We've got cheap commodities right now," Ferguson said. "Corn, wheat and safflower are all cheap. Why do they have to pay top dollar for alfalfa?"
Kern County grower Travis Fugitt said he reduced his alfalfa acreage in large part because of water availability in his region, including limits on flood irrigation. Putting alfalfa on drip, he said, adds another $400 an acre, which he said is "not very appealing." Though he still has "quite a bit of alfalfa left," he said those plantings will "eventually all come out and be replaced." He's already devoted some of that ground to a new crop: hemp.
"Today, the price (of alfalfa) is strong enough that it's worth having alfalfa, but with the dairies in the condition that they're in, they're not the most reliable buyers right now," he said.
He said he expects alfalfa prices will remain strong "for a little while" due to lower supplies, because so many farmers have removed the crop to plant more orchards and vegetables. But with hay exports to China taking a hit and dairies being squeezed for cash, Fugitt said growing alfalfa remains "real dicey."
"It pays the bills and puts money in the bank, but it's not what it used to be," he said. "You used to count on it as your cash flow throughout the growing season for your other higher-risk crops. Now, you can't really do that as much."
(Ching Lee is an assistant editor of Ag Alert. She may be contacted at email@example.com.)
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