Drought Pushed Alfalfa Prices Higher in the US
Water supply remains a significant concern for much of the Northwest region of the US heading into summer 2022, as this is the second/third drought year in a row depending on the area. Statewide reservoir levels at the beginning of May-22 were below regular water supply in all states except Washington. According to Tridge’s Origination Manager in the United States, David Didier, adverse weather conditions have put pressure on the current 2021/22 alfalfa harvest and may influence the 2022/23 season. In W3 of June-22, the price for alfalfa was USD 525/MT FOB.
Unlike the usual price decreases during the harvest, alfalfa prices remained at the same level as farmers and traders were concerned about the supply. The drought that hit most parts of the US since April 22 tensed production and stocks. According to the USDA Crop Production report in May, the total US hay stocks decreased by 6.9% YoY and 15.1% down the ten-year average. The northern plains and Rocky Mountain states were regions with heavy damage, dropping in the volume of alfalfa hay stocks by 53.6% YoY. Alfalfa hay, Timothy Hay and Oat Hay are the US's primary nutrient sources for grass-fed cattle.
North America (US, Canada, and Mexico), the largest producer of alfalfa, supplies 60% of the global quantities, followed by Europe and South America, with a share of about 15%. In terms of product, Alfalfa Hay Bales is the largest segment, with a share of 55%. The US was the number one exporter for 2021 of alfalfa hay and represented 49.4% of world exports, with a total value of USD 1.759B. Main trading partners included China, Japan, South Korea, Taiwan, and Saudi Arabia.
Of the top five importing countries of alfalfa from the US, China experienced the most substantial growth of imports with a 34.48% YoY rise, up to 1.74M mt in 2021. Significant growth was driven by the changing production practices in China’s dairy industry, switching to more quality feed like alfalfa hay and oats, with an increasing number of dairy cows raised by large and modern dairy farms, which prefer using imported hay and commercial feeds. With rising demand, the Chinese government is trying to encourage more outstanding domestic production of alfalfa.
According to the Iowa Field Office report from W3 of July-22, most of the state received rain and warmer temperatures, resulting in 4.0 days suitable for fieldwork during the week. Fieldwork included wrapping up the first cutting of alfalfa and working on the second cutting. Based on the same report, around 35% of the state’s second cutting of alfalfa hay was completed, while the conditions of crops are rated from 70% good to excellent.
Although the precipitation in July-22 will positively impact the 2021/22 alfalfa season, it will not change the situation substantially. Most states in the US are past the second cutting (the highest yields are achieved in the second or third cutting, depending on the production method), and It remains to be seen how it will affect the future 2022/23 alfalfa season. Estimations are that the drought negatively affected over 50% of beef cows. Due to the growing Chinese dairy production, further growth in the exports of quality animal feed such as alfalfa hay from the US is expected. In correlation, alfalfa hay prices will increase in the following period, considering lower stocks and high demand.
