Extreme hay here to stay?

Since we last looked at hay markets back at the end of May, prices have continued to soar.  The Dairy Australia data we’re using only goes back to 2019, but Figure 1 shows that hay prices have never been higher.  In fact the latest midpoint figure, of $645 per tonne in southwest Victoria, is 35% higher than the peak of 2019.

In NSW, where hay prices were strong in the 2019 drought, hay values are still 19% higher than 2019, despite the season being ok.  In WA, prices are also at the highest levels since 2019, with east coast demand driving prices higher as truckloads head across the Nullarbor.

Going forward, there are two schools of thought.  The first theory is more optimistic for consumers of hay.  The destocking that has taken place in the south, combined with a drive to replenish stocks, will see plenty of excess grass cut and made into hay, seeing supplies increase and prices fall.  Looking back at 2019-20, a good season, and a supply increase, saw a dramatic drop in hay values overnight.

The second theory, which does have some merit, is that this shortage is more extreme.  With hay now coming from WA, it does suggest local stocks are basically at zero.  The late autumn has delayed the sowing of hay crops, which will limit yields, and for hay to be drawn out of the hands of growers who are looking to replenish stocks, prices will have to remain strong.

Another factor at play is relatively weak cereal prices.  Back of the envelope, If a barley, wheat or oat crop is going to yield 4t/ha of grain at $300/t, this equates to $1200.  Cut the same crop for hay, yielding 6t/ha at $500/t, and it’s $3000.