2015 Hay Pricing Forecast

2015 COLORADO HAY PRICING FORECAST

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By Gary Hubbell, Colorado hay grower and United Country ranch real estate broker, Hotchkiss, Colorado May 17, 2015

Strong hay supplies in 2014; market siphoned off by drought, pent-up demand, increasing cattle herds 

2014 was an excellent year for Colorado hay growers, as there were plentiful water supplies in the Rocky Mountain region. Snowpack in the Colorado Rockies was well above normal and July blessed us with unexpected plentiful rains. Hay growers were able to irrigate their fields well into late summer and early fall, resulting in bumper crops of quality grass and alfalfa hay.

Still, because of several dry years in California and the Southwest, there was strong demand for hay and prices remained stable. Quality barn-stored horse hay brought up to $8-$9 a bale for 60-65-pound small square bales and upwards of $250 a ton for large square bales.

There were very good supplies of hay across the West in 2014 and it would seem that there would be leftover hay in the spring and early summer of 2015, depressing hay prices for the coming 2015 hay season. However, that doesn’t seem to be the case. While there’s a lot of talk about drought in California and the nation’s fruit basket of the San Joaquin Valley, no one seems to mention ongoing drought in Oregon, Utah, and lingering pockets of moderate and severe drought in Texas, Oklahoma, New Mexico, and Arizona. The ongoing drought in California and previous dry years In Oklahoma, Texas, and New Mexico have resulted in most of the excess hay inventory from 2014 being absorbed. As well, ranchers are growing their beef herds in response to the lowest cattle inventory since 1955, so their increasing herd size has been siphoning hay supplies off the market.

At Grandview Ranch, we sold every last bale of hay that we could sell, and in fact, we oversold our inventory. Right now, May 17, 2015, we are looking to buy a few tons to carry our horse herd through until we cut and bale our first cutting. I called four different suppliers who usually keep hay late into the spring season, and they’re all sold out. Ouch! As I watch hay prices through auctions and other commodity sites, prices are holding steady at $250/ton for quality hay.

Low 2015 snowpack causes scare—-May rains green up hayfields 

Spring of 2015 started with quite a scare, as it didn’t snow in the mountains for months at a time, and the spring started with mountain snowpack levels at only 45% of normal in places. That’s a grim assessment when the snow is the source of your irrigation water. It takes about 36” of water to grow a good hay crop, and nature provides only 17-20” of natural precipitation along most of the Rockies. That means you need at least 18” of irrigation water in most years in order to grow a healthy crop. 

We have excellent water rights on our ranch near Crawford. We have a high-priority ditch decree, which gives us a strong flow when the spring runoff starts in mid-April. We usually have more water than we can use. As the summer progresses and the snowmelt wanes, we can then call for our reservoir water sometime in mid-July and that keeps us irrigating well into September and even October. 

This year, however, the snowpack in the mountains was so low that it looked like we wouldn’t even have enough water in the ditch to run our two center pivots and we would have to start the season by immediately calling for our reservoir water. The Clipper Ditch, our source of water, carries up to 100 cubic feet per second (CFS) of water. Our ditch rider was hoping that we could put at least 25 CFS in the ditch. The best-case scenario was that we would have about 60 days of water—enough for a first cutting and then a few days of irrigation to grow some fall and winter pasture, but not enough for a second or third cutting. It was looking like a very tough season.

Fortunately, it began to rain soon thereafter, and it has rained consistently for the past three weeks. The ground has gotten a good consistent soaking and the center pivots have had enough water to cover the fields several times. Our hay crop is looking great! We have not yet had to call for reservoir water, and we’ve put probably 7” of water on the fields, with an additional 3” or so of rain. However, as I write this, the water level in the ditch has dropped to the point that both center pivots won’t run at the same time and I’ll have to shut one off. The snow is disappearing in the high country, and I’ll probably have to call for reservoir water within a week or two—a good six weeks earlier than normal. Still, I anticipate a good first and second cutting, and if things go right, maybe even 3 cuttings, because we have such good reservoir water.

However, another irrigation district near us hasn’t yet turned on its irrigation water because they’re still trying to fill their reservoir. They’re at least three weeks late turning on their water, and they will have only 55 days of water once they do open the headgate. That’s enough for one cutting, but not two and certainly not three. Other regions of Colorado will experience similar water shortages. Almost all Colorado locations have gotten beautiful soaking rains this May, and first cutting hay crops will be good. However, because the snowpack is still so limited, many growers will run out of water mid-summer and will not have a second or third cutting. Statewide, some basins are reporting snowpack in the 90-109% range. Most basins, however, report snowpack in the 79-90% range, which is a lot better than it was, but still not great. You have to understand that a lot of the snowpack has already melted, and it just wasn’t there in March, April, and early May. California, which is home to many dairies, is in a perilous drought and will take a great deal of hay supplies out of Colorado and other mountain states. Oregon, Washington, Utah, Nevada, and Idaho all have large regions where mountain snowpack is less than 25% of normal. Montana’s snowpack is averaging about 50% of normal.  Consequently, my 2015 Colorado hay forecast is for limited supply, high demand, and high prices. At the start of the summer, $250/ton will be the normal price for high-quality grass and alfalfa horse hay. Many farmers will get only one cutting this year, and their inventory will be quickly sold out. As the summer progresses, prices will quickly accelerate to $300-$350 a ton for 3x3x8, 3x4x8, and 4x4x8 large square bales and $10-$12 a bale for small square bales. At the end of the summer, we will see prices in the $400 a ton range for quality barn-stored horse hay. Of course, cow hay, field-stored hay, and weedy hay will bring lower prices. Quality round bales will bring similar prices, with discounts for hay that is not barn-stored. 

My advice is to pre-purchase quality hay now to assure pricing and inventory, as hay will get expensive and hard to find as the season progresses.