Collapsing hay price hits farmers' profits

After several years of escalating prices for Nevada-grown alfalfa and rising supplies as farmers planted more of the crop to cash in on the trend prices have dropped in half due to oversupply and weakened demand.

The per-ton price for Nevada hay peaked at $199 in September of 2008, but starting in January of 2009 hay prices began an almost steady downward trend and now stand at less than $100 per ton.

The dramatic price reduction affects the operations of dozens of northern Nevada farmers: Humboldt, Lyon, Pershing and Churchill counties are the state's most productive alfalfa growers in that order.

Marcia Ernst and her husband operate an 80-acre alfalfa operation in Fallon that Ernst inherited in 2007. She's put off planting one of her fields because of the tumbling prices, and she's still got hay in her barn with more growing in the field. Ernst says current prices are at levels that haven't been seen since the late 1990s, and she's concerned that she won't be able to sell of all her crop this year.

Ernst sells mostly to smaller horsemen and cow or goat owners.

"It has been hard," she says. "I didn't have any trouble getting rid of hay in 2007, and 2008 was no problem, but I have one-third of my crop left and will be cutting again in June."

Demand for alfalfa and hay grasses has waned for a number of reasons. Foremost, says Don Gephart, agricultural statistician with the National Agricultural Statistics Service, is the fact that there's more than double the amount of hay under roof today than there was two years ago.

Further impacting hay prices is decreased demand from financially struggling Nevada dairymen, who have switched from alfalfa to cheaper feed stocks, and reduced demand from horse owners, who have either sold animals or turned them loose to free graze on rangeland.

"When you are making $200 an acre on alfalfa as opposed to $80 on wheat, you get an oversupply on alfalfa," Gephart says. "It is going to be much harder for alfalfa growers financially. It's going to put the pinch to them. Inputs are not going down any, but the market is coming down on them."

When prices rose dramatically during 2007 and '08, horsemen and other large animal owners began driving out of state for lower-cost forage, says Valerie Whitfield, purchasing agent for Stockman's Supply in Elko. But people who chose to travel to Idaho farms for their hay purchases erased any gains made by lower-priced out-of-state feed through the high costs of fuel, she says.

"People were getting together on truckloads and splitting it for a better price but then again, once a person drove a truck to Idaho, by the time they go up there and back, it was just silly really."

Whitfield says hay sales at Stockman's declined the past few years as cash-strapped horse owners either turned their animals loose or gave them away. Stockman's Supply currently sells alfalfa for $12 a bale and hay-grass mix for $13.49.

Reno-area feed stores are feeling the effects of an oversupply as well. Sales of more expensive feeds soured as the recession took its toll on the wallets of large animal owners, says Cindy Oxley of Green's Feed on North Virginia Street. Equine owners that didn't either sell off their horses or find new homes for them started buying cheaper alfalfa cubes and pellets.

"As our economy shifted, horses in particular kind of took a hit," Oxley says.

"They aren't something people have to have. People did what they had to do to decrease the size of their herds."

Baled hay at Green's Feed currently costs $8.95, down from a high of $13.50. Mixed hay and straight grass is down to $12 and $13 a bale from highs of more than $20. Loyal customers who kept their animals and still bought hay severely reduced the amount of grain they purchased, Oxley adds.

Dave Atherton, manager of Feed World on Spokane Street in Reno, says sales are slow because so many former customers have sold off their horses, or they are buying direct from farmers.

"Our business is pretty slow right now, especially for hay," he says.

Donna Lewison, co-owner of Foothill Feed and Trailer Sales on Geiger Grade, says her business has stayed fairly stable because of the company's free delivery service. Foothill Feed delivers to a wide geographic circle, including Red Rock, Virginia City Highlands, Mt. Rose area and Spanish Springs.

Alfalfa grass accounts for about 60 percent of Foothill Feed's revenues.

"Our customers are pretty consistent," Lewison says. "We deliver for free, and I believe they like that service. We also try to get our hay at one place so that it's pretty consistent. That's why our hay might be little higher than other feed stores."

Foothill Feed sells grass hay for $13 bale and alfalfa and alfalfa grass mix for $12 a bale. When the business started in 2007, she was getting $18 to $21 a bale.

Oxley doesn't see feed prices declining much more in the Reno-Sparks area because of transportation costs associated with bringing feed to the Truckee Meadows.

"The Reno area doesn't have lot of production, and they still have to pay for the fuel to get it here," she says.