Historically, we have produced and sold dairy hay for the California and Nevada markets. However, the 2013 hay season is starting out a little diffrent due to the ongoing drought in Northern Nevada, the lack of range for the Nevada ranchers, the shortage of water in Western ID, and the shortage of water in CA. These factors seem to be creating the perfect stom for a better than average alfalfa price.
This analysis is to explore what option will be the most profitable for 2013 and other factors which should be considered when selling the 2013 alfalfa crop.
My assumptions are based on a farm in Northern Nevada specifically in White Pine County. The elevation is between 5500 ft to 6200 ft. Weather permiting, this area produces high quality alfalfa for the dairy market. Average dairy alfalfa yield will be 4 tons per acre, and 5 tons per acre for feeder hay. Dairy price is forecast to be $220 per ton ($880 per acre gross return) and feeder hay $175 per ton ($875 per acre gross return). All other production cost will be equal. Harvest costs are contracted to a local custom hay operator or a set price per ton. These two come out very close to the same as far as total gross revenue, so other factors to consider are:
1-Financial health of the buyer. This will be more important than ever, as both dairyman and ranchers have been struggling with high production costs, and high prices will only add to the problem. If possible procure a large deposit and add to the sales contract that no hay leaves the farm without being paid for.
2-Ensure a timely deadline to have the hay delivered to the dairy or ranch. This will ensure against winter damage and the buyer coming back in the spring seeking to re-negoiate the price. Additionally, it is always much better to have the hay shipped before the snow flies.
3-Since the margin between feeder and dairy hay is almost nothing, this may be a good year to sell into the export market (I have never had good luck selling to the exporters). Their price will probably be right in the middle of the dairy and feeder markets, and the yield will be roughly a half of a ton less than feeder hay or 4.5 tons per acre. This will result in $197.50 per ton sales price, or $889 per acre gross return.
My strategy for 2013 (be it known that my neighbors always wait and see what I do and they do the opposite and they have always come out on top):
First crop-Produce as much dairy as possible, let the weedier fields go for feeder hay since they will not produce quality hay.
Second crop-Let the hay grow a little longer and go for dairy quality where possible.
Third crop-Go for dairy hay, which is not hard since the elevation is so high, the hay almost always tests for dairy as long as it does not get rained on.
This is a very conservative approach but, I would rather sell to a reputable dairyman, be paid as the hay is in the stack, and not have to worry in February if the buyer will back out,
The best place for money is in the bank, and not in the middle of Nevada in a haystack.