FRESNO, CA. – February 10, 2015 – Driven primarily by global demand, Western U.S. Hay prices have nearly doubled in the last ten years. This new 10-year average for prices is expected to hold despite potential challenges with shipping, product testing, and the ongoing drought in California. The new report by Rabobank’s Food & Agribusiness Research and Advisory group (FAR) titled “Western U.S. Forage –What the Hay is Happening to Prices!” goes on to examine what is impacting prices and driving demand.
Vernon Crowder and James Williamson Analysts with FAR say one of the primary influencer on price has been rapid development in China. “When feeding 1/7th of the world’s population, minor changes have big effects,” said Williamson. “Following the melamine scandal in 2008, China started importing large amount of Western U.S. forage subsequently growing to account for 20% of total U.S. hay exports today.” The report also notes that in 2008 the United Arab Emirate also banned production of hay driving the global market to seek added supply from other sources.
While high prices typically tend to be the biggest influence on planted acres, Western U.S. hay producers are facing a severe and prolonged drought, forcing many to fallow good production ground. Others are selling what limited water they get to permanent less drought-tolerant crops. It is estimated that nearly 300,000 acres of hay producing ground – the majority of which was in California, was pulled from production. “Hay producers are concerned about prices reflecting falling milk prices, but the continued drought may pull even more hay out of production.”, said Crowder. The report concludes with the expectation that demand for high quality, Western U.S. forage will remain strong though the short term challenges will add increased volatility and ultimately upward pressure on prices.
The full report is available exclusively to clients of Rabobank and to media upon request.
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About Rabobank, N.A.
Rabobank, N.A. is a California community bank and a leading provider of agricultural financing and full-service banking products to California consumers, businesses and the agriculture industry. With nearly 120 retail branches, we serve the needs of communities from Redding to the Imperial Valley through a regional structure that promotes local decision-making and active community involvement by our employees.
Rabobank, N.A. is a division of the Rabobank Group, the premier lender to the global food and agricultural industry and a financial services leader providing commercial, retail and agricultural finance solutions in 48 countries around the world. From its century-old roots in the Netherlands, Rabobank has grown into one of the world’s largest and safest banks. www.rabobankamerica.com
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As a leading financial services provider for agricultural producers and agribusinesses in the United States, Rabo AgriFinance adds value using industry expertise, client-focused solutions, and by creating long-term business relationships. Rabo AgriFinance offers a comprehensive portfolio of services that gives producers the right products to prepare for, and take advantage of, market opportunities. Rabo AgriFinance representatives offer a wide array of financial services and knowledge to help customers realize their ambitions. This comprehensive suite of services includes loans, insurance, input finance and effective risk management products. Rabo AgriFinance is a division of Rabobank, the premier bank to the global agriculture industry and one of the world’s largest and safest banks.
About Rabobank International Food & Agribusiness Research and Advisory (FAR)
The Rabobank International Food & Agribusiness Research and Advisory (FAR) group is a global team of more than 80 analysts who monitor and evaluate global market events that affect agriculture worldwide. This international team works to collect key insights into commodity markets; conduct in-depth analysis of the factors that drive sector success (or failure); and examine the megatrends that ultimately influence clients’ business strategy. These analysts are internationally respected experts in sectors from protein to produce, inputs to oilseeds, and their knowledge is shared with Rabobank customers.