Koontz: Feed grain prices, weather will drive alfalfa markets in 2021

With high corn and soybean meal prices, fluctuating dairy prices, and long-term drought in the West, alfalfa farmers have a window of opportunity for higher prices for their hay in 2021.

Stephen Koontz, professor and Extension economist with the Department of Agricultural and Resource Economics, Colorado State University, presented his market outlook summary during Session 1 of Alfalfa U, Feb. 16. Koontz said farmers first have to understand how the soybean meal price, that protein component of the livestock diet, will pull alfalfa prices up along with it.

“That soybean meal price, in the early fall 2020 was $30 per ton and wound its way up to $45 per ton in January 2021,” Koontz said. “That’s real. That’s not a figment of the futures market. That’s driving the alfalfa market and will impact it on through 2021.” Soybeans had spent the last two years in the $8 to $9.50 per bushel range and when they went to $14 per bushel in January on the cash market, they pulled the corn price along with it, that energy component of the cow ration, he added.

In parts of the country, the extreme cold weather has some cattlemen driving up the cost of even corn stalks, Koontz said. In the Feb. 11 Colorado Hay Report, he showed, corn stalks were going for $100 per ton, whereas in Nebraska they’re normally $70 to $75 per ton. Same report had large squares of supreme hay going for $200 per ton.

Now, you take those higher prices and put them up against the volatility and low price concerns on the dairy side, and you have an opportunity for alfalfa to slip into rations and replace those higher priced feed grains. Koontz said. With $15 to $16 per hundredweight milk on the nearby contract, and close to $14 for the spring flush, higher feed costs spell trouble for dairy producers wanting to buy high quality forage.

Additionally, after the large liquidation of dairy cows in the last couple of years, the herds are starting to rebound and dairy cow numbers coming into the spring flush. Lots of cows to feed, with lower milk prices will push dairymen to look outside of feed grains, Koontz said.

“That price of milk doesn’t go with high $5 corn to make money,” Koontz said. And that will likely have dairy producers looking to fill rations with high quality alfalfa hay.

On top of all of this are concerns over drought and western states’ water supplies going into the spring and summer months of 2021. The December 2020 hay stocks have tightened up considerably with the winter weather, and the outlook is for a tighter hay supply in 2021. Partly because of weather, but mostly because a lot of alfalfa acres will be broken out into corn and soybean acres at those prices.

“That drought has the potential to pull prices up, but not a tremendous amount because there is plenty of forage in other places,” Koontz explained. It will depend on the quality of alfalfa hay the buyer is seeking, and the cost to haul it from outside that buyer’s region.

Looking at the futures market, corn is about $5 per bushel and at harvest that could be priced at $4.50 per bushel, Koontz said. “Soybeans are $13 per bushel, pressing to $14 per bushel, and at harvest they’re expected to come awfully close to $12 per bushel.” Overall, Koontz told growers to expect hay prices to move higher in the long run and hold steady through spring and summer 2021 at least.

“There’s lots of upside potential here,” Koontz said. And that’s some good news for alfalfa growers all over.

To watch Koontz’s full presentation, and the rest of the Alfalfa U sessions, visit www.hpj.com/alfalfau. The event was sponsored by John Deere, Alforex Seeds and High Plains Journal.

Jennifer M. Latzke can be reached at [email protected].