Kub's Den

Hay Markets: As Unusual As Everything Else This Year

Elaine Kub
By  Elaine Kub , Contributing Analyst
Pasture conditions in the summer of 2019 were notably better than the previous year, yet hay prices have risen amid quality and availability issues. (Chart by Elaine Kub using USDA NASS data)

Hay, perhaps the world's most underrated commodity, is everywhere. Some of the hay meadows of New England were hacked out of the forest hundreds of years ago and have been carefully maintained ever since to provide fodder for dairy cows. Then there are the great hayfields of the western High Plains -- thousands upon thousands of acres of prairie, just waiting each summer to be mowed, raked and baled. Even on the scruffiest remote foothills and in the verges of suburban lanes, there's always some grass or legume growing. Anywhere there is dirt, plus a little rain and a little sunshine, there will be some kind of forage that can be packed into bales and fed to ruminant animals to keep them alive through a winter. Maybe you, personally, don't think bluestem is terribly tasty or nutritious, but once it's converted into beef, it becomes one of American agriculture's most treasured products.

Now is the time of year that, typically, dairy and livestock producers would be eagerly moving hay stacks from their source locations to winter feed yards, where the forage will ultimately be fed to cattle, often in carefully calibrated feed rations. Some reports suggest that hay movement is relatively slow this fall, for two reasons: First, cattle may be staying out on pasture longer than usual this fall, and secondary, ground conditions are too muddy to get the hay stacks moved efficiently. Both of these reasons are part of the broader story of mysteriously high hay prices in the fall of 2019.

In most of the United States, the pastures still look great! Rain has fallen lavishly just about everywhere this summer. Here on my home turf of central South Dakota, the grass is still green and growing in the second week of October -- something I've never seen before in my life and I doubt I will ever see again. It will all come to a cataclysmic close here at the end of this week, with freezing temperatures and a snowstorm in the forecast. But, up until this point, we've experienced a historically luscious grass-growing season. Second and third cuttings of prairie hay have been possible in some parts of the Plains, and breeding herds and stocker cattle have thrived on grass through the summer and well into fall.

Certain parts of cattle country have slipped back into drought in recent weeks, with pockets of extreme drought (D3) notably centered in Texas and Kentucky -- but that's no reason to get bullish about hay prices. It would be like a corn trader panicking about drought in Minnesota in February -- it's not the right season to seriously affect production. Instead, let's refer back to the soil moisture scenario of mid-June, when most North American grass species were just heading out. At that timeframe, the U.S. Drought Monitor map was almost entirely devoid of any concern. USDA's crop progress observers rated 71% of pastureland as either "good" or "excellent," which was tied with 2010 for the best in recent memory (1995's good-to-excellent rating was 78%). This year's hay supplies should have been set up for historic abundance.

As far as pure tons of grass matter that grew on the continent, we probably did see historic abundance this year. If only it could have been harvested ...

There can be too much of a good thing. Not grass, but rain. So much rain that a low-elevation hay meadow looks lovely and thick and green from the road, but underneath the grass, the ground surface is too waterlogged to support haying equipment. Or so much rain falling with such inconvenient regularity that there was never a good stretch of five clear days to get the hay cut and dried and baled.

Unfortunately, all I have to document these accessibility problems are anecdotes from hay producers who were frustrated throughout the summer, or from hay brokers and hay haulers who now notice less of the commodity being traded than one would otherwise expect for this time of year.

There is also the question of quality. Some of the hay that will be available to the market this winter will likely have problems, either from being harvested at too late maturity (due to rain delays) or from moisture damage or mold (also because of too much rain this summer). Your mileage may vary; buyers should, as always, have hay sampled and tested.

Hay is one of those commodities that resists standardization. While any bushel of No. 2 yellow corn should be interchangeable for any other bushel of No. 2 yellow corn, each load of hay is unique across a multitude of parameters -- location, species, type of bale, condition, etc. Large round bales of "good" rated alfalfa traded at $162.50 per ton in Iowa last week, while alfalfa in small square bales in Pennsylvania brought the equivalent of $395 per ton. In Nebraska, prairie hay in "premium" large rounds went for $125 per ton, but regular "good" grass hay in large rounds fetched $105 per ton.

However, each of those prices represents a stiff increase over last year's reference prices at this time. USDA collects a data series of the price received for hay (all varieties and qualities of hay amalgamated together), as a monthly national average. The all-time high was hit in May 2014 at $196 per ton. May will typically be the time of year when we see a seasonal spike before the new crop becomes available. Still, it's notable that in 2019 -- when seemingly all other animal feed ingredients are "cheap" and we were surrounded by so much growing grass all summer -- this price index remains elevated. The May 2019 peak was $187 per ton, but even in August, it remained as high as $162 per ton, roughly even with the previous year when grass conditions were notably worse. So, add the hay market to the list of strange phenomena occurring in 2019.

Elaine Kub is the author of "Mastering the Grain Markets: How Profits Are Really Made" and can be reached at elaine@masteringthegrainmarkets.com or on Twitter @elainekub.


Elaine Kub