Hay Prices Rise Again – The Reasons Are Many
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Hay Prices Rise Again – The Reasons Are Many
July 2012 - Suzanne Bush

Mike Santangelo Baling Hay

Fields of hay soften the profile of over two million acres of Pennsylvania farmland. The graceful wands ripple in the breezes, the simplicity of the vista obscuring the furtive pests and threats lurking in the air, on the ground, in the skies overhead. From army worms, to spider mites, to the vagaries of climate, hay has a lot to worry about. And when hay sneezes, as the saying might go, horse farms get the flu.

A couple of years ago it was drought that caused hay prices to jump.  Then the rising cost of fuel—a critical component of hay farming—added even more to the cost. The nationwide infatuation with corn-based ethanol drove some farmers to convert their hay fields to corn, causing more shortages.  Then spider mites chewed their way through vast swaths of timothy crops, reducing supplies and increasing costs again.

Because of the importance of hay to the equine industry, the rising prices have rippled through horse farms, compounding serious cash flow problems that arose during the recession that began in 2007.

Same Dilemma, Different Year
This year, according to Marvin Hall, Professor of Forage Management at Penn State, horse farm owners should brace themselves for more of the same. “The rain we’ve gotten came a little late for the first cut,” he explains. Since 50-60 percent of the whole yield comes from that first cut, the yields for hay farms this year will be limited. “But wait,” you may think, “haven’t we had lots of rain this spring?” Hall says that we’ve had lots of rain, but it came after the fate of the hay crop was sealed.  “Cold weather stunted the growth, along with a dry early spring,” he says. “We are in the same boat again, and probably will have some shortages of hay.”

Kit Summers, known as “The Hay Lady of Pennsylvania,” says that the number of farmers who have converted alfalfa fields to corn and other grains has had an impact on prices. But there are other factors, too. She buys and sells hay to customers as far away as Texas and Florida. “It’s plain old supply and demand. With the Tsunami hitting Japan, we have an enormous amount of hay exported. There’s hay out there. But to find good quality hay—especially when you’re talking equines—the price is up.”

On June 18, good quality alfalfa was selling for $145-$200/ton at the Lancaster area hay auctions. Good quality timothy was selling for $190-$195/ton.

Hall says that hay is like any other commodity, and farmers who have it may be holding it in anticipation of better prices later in the summer. “Some of the farmers who have made hay (maybe not here, but in Nebraska and Illinois) are probably holding on to that hay, hoping prices could go higher. It may go up between now and fall another $100 a ton.” According to Bloomberg News, alfalfa prices in spring 2011 hit what was then a record $186/ton.

Important Crop, Low Return
Hay is so ubiquitous that it’s easy to think that growing it is a snap. It’s not. Good hay takes time, patience and attention. According to the University of Maryland Cooperative Extension, “Hay varies in quality more than any other harvested feed crop grown on American farms. Hay quality can differ widely even within a single species grown in the same locality.” Harvesting hay is not a simple matter either. Cutting hay too soon or too late will depress its quality. Legumes such as clover and alfalfa should be cut early in the bloom; other grasses should be cut before the seed heads form. When the hay is ready to be cut, and the weather doesn’t cooperate, hay quality suffers.

For all its importance to farmers who feed it to cattle and horses, hay doesn’t get the same attention as corn, soybean and other crops, which tend to be more profitable. “A lot of farms have gone into corn and small grains because prices for them are higher,” Penn State’s Hall says. “Ethanol is really not a factor. In fact, a lot of our ethanol plants here in Pennsylvania have shut down.” Horse farms with enough space could grow their own hay, but that is not always the optimal solution.

Eliza Walbridge, who owns Manderley Farm in Blue Bell, PA, has just finished a first cut of her first hay crop. “I am baling our front field mostly because it's available. I don't necessarily think it will be better quality, as the soil has not yet recovered from decades of conventional farming,” she says. “The hay is orchard grass, not timothy. I have no idea how much hay we will get as the weather has been challenging, but we should get enough for ourselves plus some to sell.” She says she’s going to get the hay tested to figure out what kinds of supplements she’ll need to add to her horses’ feed.

The University of Maryland Extension Service points out that hay lacking in critical nutrients, or hay that is poor quality—with more stems and fewer leaves—may cost less. But the nutritional needs remain, and satisfying them will add more to the cost of feeding horses.

No Subsidies for Hay Farmers
While farmers of corn, soybeans, wheat, peanuts and other crops are eligible for federal farm subsidies, hay farmers are not. So a couple of bad years when weather or insects or army worms ruin or undermine a hay crop could result in economic disaster for hay farmers. It might make sense for a hay farmer to reevaluate his or her situation and decide to convert to one or more crops that have some protection built in. The farm subsidy program has long been a source of controversy, but it persists despite periodic attempts to limit or even eliminate it. While subsidies have been beneficial to farmers that are eligible for them, they create distortions in the farm economy in sectors that must survive without them.

Summers says that her business has been affected by the impact of subsidies. “A lot of the hay is not produced here anymore.” She says that farmers who once grew hay have switched to other crops that are eligible for subsidies because the risk is lower. She specializes in higher-end hay, and now has to go further in search of diminishing supplies. But she understands the dilemma confronting farmers. “If I was planting 200 acres, I’d have to think about it, too.”