THE production of hay has been large this season, yet the market has been too quiet for some hay sellers.
Panic selling has begun and prices have been pushed down to levels not seen since 2005.
While there has been a slow-but-steady demand for all hay and straw, mainly into the dairying areas of northern Victoria, the traditional demand from livestock producers in southwest Victoria, Gippsland and the North East is yet to peak.
Normally hay demand increases around the much-anticipated autumn break in April and May. Clearly the cash-flow requirements and market assessment of some hay sellers is that now is the time to sell.
Reports are circulating in the hay industry that cereal hay is being sold for as little as $70 a tonne, excluding freight and GST, on farm in the southern Wimmera.
There were already reports that hay was selling as low as $80 to $90 a tonne on farm. At these price levels, sellers are seeking to repay their harvest costs without any consideration for establishment or spraying during the season.
It has been a bountiful production season for hay. Hay sheds are now full in all areas, except southern NSW.
Riverina producers were generally not blessed with a favourable spring last year.
This will have an impact on the hay market during autumn and winter as the normal flow of hay from properties north of the Murray River will be dramatically reduced.
Vetch hay is also getting caught up in the discount war. Depending on quality and freight to market, vetch hay has been selling between $170 and $190 a tonne on farm. Recent trades suggest that vetch is selling at levels well below these prices, even as low as $140 a tonne on farm.
Typically, it has been the price of the hay that is circulating through the industry, however there are no details of the associated quality of the bargain basement hay. This season more than most there is a marked difference in hay quality. Price will differentiate between high-quality hay shedded without rain damage, and leached and rain-damaged hay that still remains stacked in the paddock.
The seasoned hay sellers are concerned with these developments. Despite this they are still waiting for the demand for hay to peak before they set their prices.
These market developments illustrate the likelihood of carryover hay stocks this season. Hay merchants say in previous years they generally carried a portion of hay from one season to the next. However in the past 10 years, stocks of hay have run down and cleared before the new crop is baled.
Perhaps a carryover of hay is a sign that supply and demand is returning to normal. Such carryover stocks could help buffer any price spikes from future dry times and assist in a sustainable demand from beef, sheep and dairy farmers.
