Reducing hay costs in a down year: Where to cut and where not to cut

 

PROGRESSIVEFORAGE.COM – The 2016 alfalfa production season has been a challenging one to say the least – somewhat reminiscent of 2009, or of periods in the early 2000s. Alfalfa producers enjoyed record high prices in 2014, but they dropped significantly in 2015, and this year has been worse yet.

Not only has the price been poor, but movement has been sluggish, especially for “non-test” hay. Prices for this type of alfalfa hay (in the low $100s per ton) resemble prices of decades ago. The 2016 alfalfa production season has been one that many producers would prefer to forget.

One thing is for certain when prices are this low, growers search for ways to cut costs. A common approach, when faced with this situation, is to pull back on all inputs. However, this must be done selectively and with extreme caution because reducing inputs can lower yield and ultimately diminish profit or increase loss.

Growers surveyed

To get a better idea of the strategies growers are currently employing to cope with a depressed hay market, we conducted a survey consisting of 12 questions and sent it to producers on the Alfalfa Symposium email list. A total of 151 responses were received from alfalfa producers (primarily from the Western states of California, Oregon, Utah, Arizona, Idaho and Washington) and are summarized below.

Our grower survey indicated most growers altered their farming practices somewhat in response to the down hay market this year (see Figure 1). Only 21 percent of the respondents indicated that it was business as usual this year and that they didn’t do anything special.

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Equipment purchase

The most common response to a depressed market was to purchase less equipment – 42 percent of the survey participants selected this response. While not good news for equipment manufacturers, this is probably not too surprising. The cost of new tractors and hay-making equipment has risen to a point where it is difficult for alfalfa growers to justify a new purchase or to have the cash flow for a down payment in such a low-price year. However, equipment prices are often lower in a year like 2016, so if a grower has the economic resources and plans to stay in the hay business long-term, an equipment purchase in a low price year may actually be a good idea.

Fewer new plantings

One of the most popular reactions to a depressed market according to the survey was not to plant any new fields, and 26 percent of growers indicated they abandoned lower producing fields. This approach makes sense when a grower has the capability of switching to more profitable rotation crops. However, many alfalfa growers have few viable alternatives. On one hand, with questionable alfalfa prices for months to come and no clear upturn in sight, it is tempting to cut back on alfalfa acreage.

However, on the flip side, alfalfa acreage is much lower than it has been historically, and if growers continue to abandon lower producing fields and plant fewer fields, now may be a good time for individual farming operations to plant alfalfa, especially if they plan to stay with alfalfa production long-term. As a perennial crop whose production typically peaks the second year, it is usually best to have a continual rotation schedule set up, with a new crop coming along. The last thing you want is for the price to turn around and only have older depleted stands left in production.

Trying to time plantings so that peak production is in sync with high-price years is like trying to time the stock market. Good luck on that – if we knew definitely what would happen, we wouldn’t be writing this article. But it does make sense to some degree to be a contrarian and plant when the prices take a nosedive like this.

Changing agronomic practices

The second most popular response for how growers dealt with the depressed market was that they cut more frequently for quality – selected by 32 percent of the respondents. “Did not fertilize or reduced rates” was another popular response with 28 percent of the growers indicating they did this. Twenty-one percent of the growers surveyed indicated that they reduced their workforce and did more of the work themselves – a difficult decision recognizing that most alfalfa farmers are probably overworked already. The least popular responses included the following: “used less tillage for planting,” “planted a cheaper variety” and “cut back on seeding rates.” Less than 5 percent of the respondents selected any of these three management approaches to low alfalfa prices.

Selecting a more profitable cutting schedule

Cutting more frequently to produce higher quality hay was the most popular production-oriented response. However, when specifically asked about their cutting schedule in a separate question, 40 percent of growers indicated that they did not change their cutting schedule this year in response to market conditions – many were probably already cutting frequently for higher quality.

This approach makes sense in a year like 2016. As is usually the case, there is a larger difference in price between premium and supreme quality alfalfa hay and the lower hay quality grades in a depressed hay market. This was true in spades this year. The price spread in California was often greater than $100 per ton between high- and low-quality categories, and sometimes, supreme quality hay was actually worth twice as much as fair quality hay. This wasn’t as pronounced in other Western states, but the same general trend applies.

The decision to “go for quality” and cut more frequently in a down year like this makes sense. The frequency at which alfalfa is cut affects forage quality more than any other management factor under producers’ control. More frequent cutting results in higher forage quality but lower yield per cutting and oftentimes lower seasonal yield as well. However, with the premium that existed for high-test hay this year, the yield penalty was more than offset by higher prices. Not only was the price much lower for mediocre quality hay, but sales were sluggish as well, so many growers were “stuck” with medium- or low-quality hay.

Harvest schedule approach

Twenty-three percent of the growers responded that they shortened the interval between cuttings, while 25 percent indicated that they did a combination of shorter and longer intervals. We advocate the combined approach. It is extremely difficult to produce high-test hay in midsummer. During the hot temperatures of midsummer, the internode length (distance between leaves on the stem) is typically greater, resulting in a lower leaf-to-stem ratio, and the stems are lower in quality due to more rapid accumulation of fiber. To produce high-test hay in midsummer, alfalfa will likely need to be cut at an extremely short interval at the pre-bud growth stage. Not only is there a severe yield penalty for such early cutting, but this reduces the vigor of the alfalfa and its ability to recover for future cuttings.

Therefore, we recommend aiming for high quality in spring and fall but giving the plants a “rest” and harvest at 10 percent bloom in the middle of the summer when producing top-quality alfalfa is very difficult anyway. For areas with more than six cuts per year, growers should consider allowing at least two cuttings to “go late” to maximize yields and build root reserves and plant regrowth potential. It is not a good idea to try to make high quality at every cutting with short cutting schedules, since very frequent harvests result in stand loss, weeds, yield reduction and often lower profitability.

Fertilization

The most popular response after purchasing less equipment and not planting new fields was to not fertilize or use reduced rates of fertilizer. When asked more specifically about their fertilizer practices in a separate question, only 43 percent of growers said they had no change in fertilizer use. More growers said that they either quit fertilizing entirely, used reduced rates or tested more and scrutinized rates. Not fertilizing or cutting back for a year may be a viable option for growers who have fertilized most years and have maintained at least adequate fertility levels. This is especially true for growers who may be following a higher value crop that is heavily fertilized or for growers who have put on a set rate each year that may exceed crop needs.

Oftentimes, however, the growers who consider not fertilizing in low-price years are the ones that can least afford to do so. They are typically the ones who may have scrimped in the past and the fertility level of their field is low enough that fertilizer is important even in a low-price year.

So how do you know if you can afford to skip fertilizing or use reduced rates? Soil or plant tissue testing is the best way to know if you could afford to cut back on fertilizer. It may be tempting not to pay laboratory analytical fees when hay prices are low, but this would be a poor decision.

Weed management

A majority of growers (66 percent) did not alter their weed control program despite low hay prices. A minority (21 percent) did indicate that they applied less herbicide, and 6 percent said they actually applied more. It appears that most growers recognize the importance of effective weed control in a down year. Whether weed control practices are economical obviously depends on the weed infestation level, the type of weeds present in a field and the herbicides selected and their cost.

A heavily infested field, or a field with toxic or unpalatable weeds, will obviously be discounted to a greater degree. A rough estimate would be that alfalfa hay with light weed presence is discounted around $10 per ton, while heavy weed presence reduces the hay price by $30 per ton or more. Hay infested with a toxic weed like common groundsel or a weed that causes feeding problems like hare barley (winter foxtail) will be discounted even more, and in a depressed market, it may be difficult to sell at any price.

Insect control

Most growers (53 percent) did not change their insect control program in response to poor alfalfa prices this year. However, 20 percent indicated they sprayed less and 22 percent indicated that they cut early in response to pest pressure. Only 3 percent actually indicated that they sprayed more. The decision to apply an insecticide in any year (high- or low-priced) should be based on integrated pest management (IPM) practices and economic thresholds. The term “economic threshold” implies that economic conditions are factored into the decision. In fact, the definition of an economic threshold or treatment threshold is the pest density at which a control measure is recommended to prevent a pest population from increasing further and causing economic loss.

In theory, an economic threshold should be continually revised to account for new varieties, new management practices and variation in both commodity price and the cost of insecticides or other control measures, and the efficacy of the chosen control measure. However, our current thresholds in alfalfa are too simple (our opinion) and should be updated. A threshold should be a dynamic value rather than a static number and account for annual variations in the alfalfa market, insecticide price, as well as current and predicted weather conditions.

The current economic threshold for alfalfa weevil of 20 larvae per sweep was developed in the early 1970s and has remained fixed since it was first published over 40 years ago. Similarly, economic threshold values for aphid species were also developed in the 1970s, before varietal resistance was as integrated into most alfalfa varieties as it is today. In addition, current aphid thresholds are based on the number of aphids per stem, a practice that is rarely done by pest control advisors (PCAs) or growers. A better threshold for when blue alfalfa aphid and pea aphid co-occur (which is quite common) is also needed.

Another option to carefully consider in low-price years is to cut the crop early instead of applying an insecticide (a practice 22 percent of the growers indicated they did). The viability of this approach depends on the growth stage of the alfalfa and how much time is left until the desired cutting date. Ordinarily, if the pest population is above the threshold and there are at least two weeks before cutting, an insecticide treatment is advisable. Another factor to keep in mind with early cutting is that while cutting controls most pests, this is not always the case. Alfalfa weevil, a common pest in California and other Western states, can sometimes survive a cutting and congregate under the windrow, causing serious damage – something we observed in the Intermountain Region and in the Central Valley this year.

Irrigation

There is no question irrigation is one of the most critical inputs for alfalfa production in the West. Growers recognize this. In this low-price year, 53 percent of the growers surveyed did not change their irrigation practices, and of those who did, hay prices were not the primary cause (35 percent changed due to water supply, whereas only 12 percent changed due to low prices). When specifically asked about how they irrigated in this low-price year, the most popular answers were that they upgraded irrigation equipment and management, and irrigated more carefully using evapotranspiration (ET) data and soil moisture sensors. An equal percentage of growers (16 percent) either irrigated less per cutting or quit irrigating some fields partway through the season. Only 7 percent quit irrigating some fields entirely.

Because of its impact on yield, proper irrigation management is essential in a low-price year. It is important to know how much water your irrigation system applies; identify the amount needed to satisfy ET and account for inefficiencies in the irrigation system, and apply only that amount and not more. This is done through soil moisture monitoring or weather-based irrigation scheduling. Improving irrigation system efficiency can also improve profits by reducing the amount of applied water needed to ensure that at least most of the field is receiving enough water to satisfy peak ET.

Summary

There is no sure-fire universal recommendation for how to cut costs without reducing overall profitability, but it is clear that cost cutting should be selective and not indiscriminate. The answer is different for every farm. Maximum yield and maximum economic yield are usually different. Maximum economic yield in agriculture often occurs at 90 to 95 percent of maximum yield, and in a low-price year, this percentage is likely lower. In addition, the point of maximum profitability varies from year to year depending on alfalfa price and the cost of inputs. Careful scrutiny of each input is more important in a depressed alfalfa market than when prices are higher.  

This presentation was given at the 2016 Western Alfalfa and Forage Symposium and has been modified for length. To read the full presentation, visit the University of California – Davis website.

Steve Orloff is a UCCE farm advisor for the University of California – Davis; Dan Putnam is an alfalfa and forage crops specialist for the University of California – Davis; References omitted but are available upon request.

 

 

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