We’ve been following the hay market for a couple of months now, since prices peaked at the end of winter. The slide in hay prices has continued into October, but it has slowed, and now there are reports of crops being cut for hay as the dry October bites.
The continued slide in hay prices was not unexpected. Figure 1 shows that on the east coast, pasture hay prices are now down to an average of $355/t in south-west Victoria and $350/t in central-west NSW.
Cereal hay has held up better, trading at $450/t in south-west Victoria. Cereal hay generally trades at a premium to pasture hay, but it’s normally in the order of $30–50/t, not the $95 it currently stands at (Figure 2).
With hay season upon us, it will be interesting to see if demand sparks up to meet the oncoming supply. The slowing of the fall in prices suggests it might be.
The dry finish to September and start of October has brought the option of cutting crops for hay sharply into focus. Croppers with good biomass but limited soil moisture to finish crops might see $450/t for cereal hay as a better option than harvesting. Cutting, baling, and freighting to market are more expensive than harvesting, but if the yield potential is dropping, it is a viable option.
Harvesting a 1t/ha wheat crop will only deliver $280–300/ha in the current market. If the crop has enough bulk to produce 2.5t/ha of hay at $400 ex-farm, this brings $1,000 of income. Obviously, the cost of making hay and harvesting needs to be compared, but there are some compelling price differentials to encourage cutting crops.
Grain markets appear to be on the move in response to drying conditions. Local wheat values have gained some ground in the last week, despite further falls in international markets.
What does it mean?
Despite falling hay prices and a small increase in grain prices, the tight supply of hay is keeping prices at a level that will encourage the cutting of crops with more limited yield potential. The dry spell has also decreased potential yield for dedicated hay crops, and this might offer some support for hay values.
Key Points
- Hay prices have continued to fall, but seasonal conditions are seeing crops being cut.
- Grain markets have gained some ground on the drier conditions, but remain cheap relative to hay.
- Cutting of crops may see hay prices continue to fall.
Click on figure to expand
Click on figure to expand
Data sources: Mecardo, Dairy Australia, MLA
