Local demand soft while exporters seek only top-quality cereal
Oversupply looms with strong rainfall outlook, putting pressure on prices and creating a buyer’s market.
A SURGE of new season’s hay is about to hit the paddocks of southeastern Australia, but the true shape of the hay market is yet to be revealed.
Given the extended pasture season and wetter than average rainfall outlook, livestock producers have lower nearby hay needs than normal years.
But a few will take the opportunity to pick up some cheap hay and focus most of their attention on the most heavily traded cereal hay.
Over half of the fodder grown in Victoria is pasture hay and silage. Most of the growers of this fodder pay little attention to prices as it is produced for home consumption.
While only 10 per cent of hay in Victoria is exported, exports represent 40 per cent of cereal hay produced and this market plays a big role in determining the price of hay.
Unlike the past few years, a subdued domestic demand in Victoria and NSW should mean that the 2020/21 season will be influenced more by export bids than other factors.
To secure a reliable supply of the best quality of oaten or wheaten hay, some major hay exporters forward contract hay with minimum price contracts for an array of quality grades.
Other exporters prefer to set prices with their regular growers according to the market at baling.
This season some top-grade cereal hay has been contracted at a minimum of $260 a tonne delivered export plant plus potential premiums for storage and freight. As domestic hay demand is soft, further top-ups of the minimum prices appear unlikely.
Hay exporters have a strong interest in high grade this season.
Competing supplies of timothy and alfalfa hay in the Pacific North West of the US have been damaged by 50 to 130mm of rain during May and June.
At the equivalent of approximately $250 a tonne ex-farm plus GST, top-grade export hay will effectively be out of reach for domestic buyers and be purchased exclusively by exporters. Domestic buyers will be looking to compete for hay that is surplus to the needs of exporters where the price can slip under the high contracted price levels.
But high-quality export hay is not securely stacked in sheds yet and the wetter than average forecast is concerning both exporters and hay growers.
Victorian and South Australian cereal hay is likely to see some downgrading from rainfall this season starting this week. Light regular falls are forecast each day this week, delivering up to 15mm of rain in the Mallee and 15 to 25mm in the Wimmera.
The recent warm and dry weather will have caused hay crops to mature and many growers in the Riverina and northern Victoria will have little choice but to cut crops this week before the fibre content exceeds maximum levels.
Should the rain this spring restrict the supply of top-grade hay, hay exporters will be competing more strongly for the lower grades in order to satisfy their throughput volumes.
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