U.S. alfalfa prices up 62% year-over-year in July to a record US$186/ton as Texas drought, export boom creating shortages; dairies seeing record hay prices as shipments to China cheaper than domestic trucking

LOS ANGELES , August 9, 2011 () – Shipping U.S. hay to China has become cheaper than moving it to farmers in central California, further complicating shortages and sending prices for the dairy industry to record highs, Bloomberg reported Aug. 9.

To ship hay from Los Angeles to Asia, ocean freight costs around US$30/short ton (0.91 tonnes), while trucking the crop from southern California to the state’s center costs $53, Greg Braun, president of Border Valley Trading LLC, said.

According to government data, alfalfa prices jumped 62% in a year to reach a record $186 a ton in July, Bloomberg reported.

The costs for containers to carry hay bales is being driven down by unfilled boxes on shipping lines bringing Asian goods to the U.S. on return journeys. This fact is adding to the largest U.S. trade deficit in nearly three years and creating concern around earnings for diaries and cattle feedlots that were expected to contribute to the U.S. agriculture industry’s projected record income of $94.7 billion this year.

High level of hay exports are taking away from California dairies, farmer Tom Barcellos said, Bloomberg reported. The high-quality alfalfa hay used for dairy cows in California, the largest milk producer, was up to $320/ton last week, compared with $220 to $260 a year ago, Barcellos added.

On the Chicago Board of Trade, corn prices are up 63% year-over-year. Despite the doubling of milk prices in the last two years, 65% of farmers’ output value is still being spent on feed, with a profitable ratio needing to fall around 50%, Barcellos said.

Last year, dairy income more than tripled, but will most likely drop 13% in 2011, while grain producers will see their income go up 23%, after a 9.1% advance in 2009, with a Texas drought driving up crop prices, the government estimates.

In 2010, the U.S. exported a record 3.22 million tons of hay with a value of $825 million, U.S. Dept. of Agriculture data shows. In the first five months of this year, cargoes were up 11%. Nearly 80% of the crop was sent in containers last year, PIERS UMB Global Trade said, Bloomberg reported.

An historic drought in Texas, the largest U.S. grower, combined with the jump in exports is compounding hay shortages. With farmers planting more profitable crops including corn, soybeans and wheat, the 2011 hay harvest may be the lowest on record since 1909 with 57.605 million acres, USDA data shows.

The primary source of this article is Bloomberg, New York, New York, on Aug. 9, 2011.

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