Diersen, Matthew

Opheim, Tosha

English

Research Papers in Economics

 
*Contact the author at matthew.diersen@sdstate.edu or 605-688-4864. 
 
            E C O N O M I C S 
   C O M M E N T A T O R 
South Dakota State University        No. 534                             September 8, 2011
 
  HAY SUPPLY AND DEMAND  
BALANCE SHEET 
 
             by 
 Tosha L. Opheim 
Student Research Assistant 
and 
       Matthew Diersen* 
         Professor / Extension Specialist 
 
As with most markets, price and product distribution 
are affected by many things. The supply, demand, 
and price of hay are no different. U.S. hay prices 
continue to set all time record high levels. One 
factor behind the high prices is the southern drought 
many farmers and ranchers are facing. Extreme 
drought is affecting their supply of hay and causing 
them to consider buying more hay than normal. 
Another factor affecting the aggregate domestic 
demand for hay is the trend of fewer livestock 
numbers. In addition to these important domestic 
factors, the hay market is increasingly affected by 
international trade. 
 
In this Commentator, we examine the recent U.S. 
hay situation. We measure and incorporate imports 
and exports into the balance sheet to give a more 
accurate view of the U.S. hay situation. We also 
look at domestic feed disappearance to provide a 
clearer picture of trends in feed use. Ignoring trade 
or domestic demand would give a much different 
estimate of ending stocks and prices. 
 
Hay statistics are taken from National Agricultural 
Statistics Service (NASS) reports. The national price 
for all hay in the U.S. reached a nominal all-time 
high level in August of $172 per ton. The prices at 
many state levels continue to set records as well. 
Many states do not have a price reported monthly 
(figure 1). However, most of the areas with 
marketable hay supplies have prices. The lowest 
prices in August were in the northern plains. North 
Dakota and Montana have had ample moisture the 
past two years resulting in large production levels 
and low prices. The rest of the north central states 
mainly have prices from $100-150 per ton. Drought 
conditions have pushed the prices higher in the 
southern plains. The state with the highest price is 
New Mexico at $253 per ton. The prices are also 
relatively high throughout the western states. Spot 
market prices for exports continue to remain 
competitive. 
 
Figure 1. August All-Hay Prices ($/ton) 
 
 
Historic and current balance sheet numbers are 
available from Economic Research Service (ERS) 
reports. The typical balance sheet begins with May 1 
stocks and adds production to obtain total U.S. 
supply (table 1). Then one subtracts disappearance 
from the total supply leaving ending stocks (May 1 
of the latter year). 
 
Within the standard hay balance sheet, usage and 
exports are included into the broad category labeled 
disappearance. Imports are not accounted for in the  
 
total supply. Therefore, the impact of imports and 
exports on the balance sheet is unknown. 
 
Table 1. All Hay Balance Sheet (million tons) 
Marketing Year  2008/09  2009/10  2010/11 
Beginning Stocks  21.6  22.1  20.9 
Production  146.3  147.7  145.6 
Supply  167.9  169.8  166.5 
Less Disappearance  145.8  148.9  144.3 
Ending Stocks  22.1  20.9  22.2 
Source: USDA-ERS 
 
Hay Trade 
Typically the U.S. is thought of as a hay exporter, 
without a big market share on the importing side. 
According to the Livestock Marketing Information 
Center (LMIC), in a March 2011 newsletter, hay 
exports have been increasing over time. In 2010, hay 
exports were 2.6% of annual production, which is an 
increase from 1.2% in 1994. As U.S. hay exports 
continue to increase, the impact on domestic 
disappearance remains unknown. The LMIC also 
generates a complete balance sheet and balance 
sheets for alfalfa and for other hay. 
 
Although the numbers are small, the U.S. has started 
to increase its volume of imported hay, specifically 
from Canada. According to Tyrchniewicz (2010), 
the U.S. mainly imports other hay and timothy hay. 
In the U.S., timothy hay falls into the category of 
other hay. Trade data were obtained from the United 
States International Trade Commission (USITC). 
When alfalfa products are included in imports, the 
percentage of alfalfa hay equivalents grows and is 
comparable to other hay imports. 
 
Export values are broken down into other hay, 
alfalfa hay, and alfalfa hay products. Alfalfa hay 
products are broken down even further into alfalfa 
cubes dehydrated and sun cured, alfalfa meal 
dehydrated and sun cured, and alfalfa meal 
miscellaneous. The alfalfa hay product total is 
reported in metric tons, presumably at standard 
moisture levels. We added them together to get a 
general total. 
 
After dehydration or drying, there are moisture 
differences between alfalfa hay and alfalfa hay 
products. To account for this, we used the Feedstuffs  
2011 Reference Issue and Buyers Guide to obtain 
standard moisture levels. The dry matter content of 
alfalfa products is 93%. According to Mid American 
Auction Inc. reports, the average moisture content of 
alfalfa hay is 15%. Because hay products have less 
moisture than baled hay, each ton of hay products 
was adjusted up to a baled hay equivalent by 
multiplying by 1.094.  
 
After converting for moisture differences, we were 
left with other hay exports, alfalfa hay exports, other 
hay imports and alfalfa hay imports. Both imports 
and exports are calculated in metric tons (2,204.62 
lbs). We took these numbers and converted them 
into U.S. short tons (2,000 lbs). All traded quantities 
were converted by multiplying by 1.102. Thus, after 
final calculations alfalfa hay products were 
increased by over 20% from their original reported 
quantities. 
 
The original balance sheet entries are reported on a 
marketing year basis, May 1 through April 30. We 
prorated the yearly traded quantities into two 
sections. We assumed the first four months of each 
calendar year are related to the earlier marketing 
year, and the last eight months are related to the 
latter marketing year. We calculated the first four 
months and the last eight months, and appropriately 
distributed them as such. The trade data are reported 
monthly so for 2011 we used the monthly total from 
January through April. 
 
After all conversions and calculations were made, 
we then started factoring the imports and exports 
into the balance sheets. We first kept alfalfa and 
other hay separate, and then totaled them in a final 
balance sheet. Production and ending stocks 
remained the same. Imports were added to supply, 
which increased it. Exports were subtracted from 
supply, and the residual amount was relabeled 
domestic use. 
 
The alfalfa balance sheet is affected by trade (table 
2). The exports dominate and as a result the 
domestic use figure is smaller than the original 
disappearance figure. Imports have declined in the 
past three years, but prices have fallen domestically 
too. Domestic use is the one aspect that changed in 
2010/11, falling substantially from a year earlier.  
  
 
The other hay balance sheet was affected similarly 
(table 3). Imports have been larger relative to alfalfa 
while exports have been mixed. 
 
Table 2. Alfalfa Hay with Trade (million tons) 
Marketing Year  2008/09  2009/10  2010/11 
Beginning Stocks  10.30  10.60  10.10 
Production  70.20  71.10  67.90 
Imports  0.09  0.06  0.05 
Supply  80.59  81.76  78.05 
Less Exports  1.50  1.93  1.92 
Less Domestic Use  68.49  69.72  65.73 
Ending Stocks  10.60  10.10  10.40 
       
Disappearance  69.90  71.60  67.60 
Sources: Original entries are from LMIC. Trade data are from 
USITC. 
 
Table 3. Other Hay with Trade (million tons) 
Marketing Year  2008/09  2009/10  2010/11 
Beginning Stocks  11.30  11.50  10.80 
Production  76.10  76.60  77.70 
Imports  0.10  0.08  0.06 
Supply  87.50  88.18  88.56 
Less Exports  1.77  1.86  1.97 
Less Domestic Use  74.24  75.52  74.69 
Ending Stocks  11.50  10.80  11.90 
       
Disappearance  75.9  77.3  76.6 
Sources: Original entries are from LMIC. Trade data are from 
USITC. 
 
Hay Balance Sheet 
The combined totals reflect a similar pattern from 
the impact of trade (table 4). Recent trends give 
some indications of the impacts likely for 2011/12. 
Beginning stocks were relatively tight in the 
beginning of 2007/08 at 15.0 million tons. At the 
start of 2011/12 the stocks were higher at 22.2 
million tons. Production is very small in 2011/12, 
currently projected at 128.9 million tons, as fewer 
acres were harvested and yields were down sharply 
in the southern plains. Anecdotal reports suggest hay 
trade is continuing at the same pace as a year ago. 
Thus, supply is likely to be 151.21 million tons, very 
low compared to recent years. If exports remain 
similar to last year, then the remaining unknown is 
domestic use. 
 
Domestic demand is largely driven by livestock 
consumption. In the U.S. there has been a steady 
decline in livestock inventories. One common 
measure of feed demand is from roughage 
consuming animal units (RCAU), which weights 
different types of livestock by the amount of non-
grain feed consumed. RCAU is computed and 
reported by ERS, but only forecasted by LMIC 
(table 4). As inventories have declined, so has 
RCAU. 
 
 
 
 
 
Table 4. All Hay Balance Sheet with Trade (million tons) 
Marketing Year  2006/07  2007/08  2008/09  2009/10  2010/11  2011/12 
Beginning Stocks  21.30  15.00  21.60  22.10  20.90  22.20 
Production  140.80  146.90  146.30  147.70  145.60  128.90 
Imports  0.15  0.20  0.19  0.13  0.11  0.11 
Supply  162.25  162.10  168.09  169.93  166.61  151.21 
Less Exports  2.67  2.79  3.26  3.79  3.89  3.89 
Less Domestic Use  144.58  137.71  142.73  145.24  140.52  131.82 
Ending Stock  15.00  21.60  22.10  20.90  22.20  15.50 
 
           
RCAU (millions)  71.8  71.5  70.9  70.2  69.5  68.3 
Disappearance  147.10  140.30  145.80  148.90  144.30  133.87 
Disappearance/RCAU  2.05  1.96  2.06  2.12  2.08  1.96 
Domestic Use/RCAU  2.01  1.93  2.01  2.07  2.02  1.93 
Sources: Original entries are from USDA-ERS and LMIC. Trade data are from USITC.  
 
We calculated changes in hay disappearance per 
RCAU. We calculated the difference in the original 
supply and disappearance per RCAU, and the supply 
and disappearance per RCAU after imports and 
exports.  As expected, domestic use per RCAU is 
less than the originally calculated disappearance per 
RCAU because of trade. 
 
The 2011/12 disappearance and domestic use totals 
are computed by multiplying the low levels per 
RCAU observed in 2007/08 by the forecasted 
RCAU level of 68.3 million units. Note that 
ignoring RCAU adjustments would likely imply 
using the disappearance figure from 2007/08 of 
140.50 million tons. That would leave ending stocks 
at 10.60 million tons. Ignoring trade would suggest 
using the projected disappearance figure of 133.87 
million tons for 2011/12, leaving ending stocks of 
17.23 million tons. Bringing in the effects of trade 
and using a conservative domestic use estimate of 
131.82 million tons leaves a tight, but reasonable 
level of 15.50 million tons. 
 
Without adjusting for trade, disappearance per 
RCAU would likely show an increase. As the 
RCAU level decreases and as exports continue to 
increase, the difference between disappearance and 
domestic use also increases. Therefore, 
incorporating trade into the balance sheet and 
calculating the domestic use per RCAU, rather than 
the disappearance per RCAU, reflects a more 
accurate account of domestic hay consumption and 
the likely impacts on U.S. hay prices. 
 
References 
Livestock Marketing Information Center. (2011). 
“International Hay Export Markets: Historical and 
Present.” Analysis & Comments, Letter #12, March 
23. 
 
Tyrchniewicz Consulting. (June 2010). “Long Term 
International Forage Marketing Strategy for the 
Canadian Forage and Grassland Association.” 
Research report prepared for the Manitoba Forage 
Council. 
 
**************************************************************** 
ECONOMICS COMMENTATOR 
**************************************************************** 
Department of Economics       
South Dakota State University              Phone: 605-688-4141 
Box 504   Scobey Hall                  Fax:   605-688-6386 
Brookings, SD 57007-0895       E-Mail: Penny.Stover@ sdstate.edu 
75 copies of the newsletter were produced at a cost of less than $100 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Livestock Marketing Information Center.

Hay Supply and Demand Balance Sheet

http://repec-sda.sdstate.edu/repec/sda/pdf/Commentator/No534.pdf

Hay Supply and Demand Balance Sheet

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