2024 Hay Market Insights and Trends: a discussion with Dave Clothier

Jon Paul Driver  0:05  

Welcome to the Feed Central Hay Matters Podcast, your go-to source for all things hay related in Australia. I’m your host, John Paul Driver. In today’s episode, we’re joined by Dave Clothier, the National Sales Manager for Feed Central. We’re going to talk about just general market conditions today and get some thoughts around rain-damaged hay in the paddocks versus shedded hay and shipping distances. And we’re going to talk through some livestock supply and demand considerations as well. We’re here to bridge that gap between the buyers and the sellers of fodder, providing valuable insights for everybody. Whether you’re out in the field, considering planting, or looking at your feeding schedule. Let’s get started with the biggest market drivers, always the weather. What’s it been like? Do you have any insights on the forecast here?

Dave Clothier  0:50  

Look, really since the start of December, right through to now, there’s been above average rainfall for the majority of the summer, right up and down the Eastern Seaboard, from the South to the North. Obviously, some people miss out on those bigger falls, but largely, everyone’s received above-average rain, and it is set to continue for the foreseeable future.

Jon Paul Driver  1:14  

And how is that playing through in the market? 

Dave Clothier  1:19  

Well, increased rainfall obviously has a cause and effect on available pastures and pasture growth. So, while the forecast for El Niño back in the spring had people unloading livestock, that’s now flipped on its head. There are people looking for livestock, which has increased livestock demand and prices to utilise the pasture that they have right now. Hay demand over the last six or eight weeks has dropped off considerably. But as we go forward, I would imagine that, particularly with weaning that starts in March, and then we get into the cooler months of April, May, and June, demand typically increases regardless of the season.

Jon Paul Driver  2:00  

That’s just the seasonal demand. Right?

Dave Clothier  2:27  

Yeah, that’s right

Jon Paul Driver  

Playing this out. You’re talking about getting into that seasonal demand for hay. The question I want to ask is about livestock prices and how that plays through demand long term. We’re observing a short term increase in the price of maybe feeder animals or whatever animal you can buy to make use of the grass that you’re growing. How does that play out?

Dave Clothier

Increase prices and availability of pasture augurs very well for demand going forward in the sense that the animals are worth more and that justifies the need to feed and hang on to those livestock through the winter months until we get into spring from a feeder type perspective and in a feedlot job, the price has risen. So the intake of cattle in the feedlots has wound back considerably over the last couple of months. And as we get into the cooler months and prices stabilise they will start to increase their intake. And given that the overall expansion in the feedlot sector, allowing for them to feed more numbers that will also have a considerable effect on hay and straw demand going forward.

Jon Paul Driver  3:15  

You have available pasture right now that’s going to bolster the number of animals that maybe aren’t getting hay right now. But at some point in the future they do have to go to a feedlot.

Dave Clothier  3:26  

Yeah, that’s right. And while demand is pretty tight at the moment as it starts to cool down we’re over the hump of the hottest part of summer is just about over, graziers will start to look at you know putting quality hay in their sheds for the winter. Considering new season’s a long long way away in October the quality hay will continue to be in demand through that period.

Jon Paul Driver  3:49  

And let’s split up available hay supplies right now we know we have a fair supply. And correct me if I’m wrong. My interpretation is there’s a fair supply of high quality hay available for trade on the market. And then there’s also a pile of not so nice hays sitting out there that has been rain damaged, how do producers navigate through those two types of inventory right now?

Dave Clothier  4:15  

Well, because it’s been such a widespread event right up and down the Eastern Seaboard, I would suggest that the majority of graziers are very aware that paddock-stacked hay is not an option for them. They want continuity and consistency. They’re more informed than ever, after specifics, and they’re willing to pay for quality hay. Right now, there’s probably 25% or 30% of hay that is paddock stacked and has been compromised in one form or another. Which takes away the opportunity for those negotiations albeit they might still happen locally, over-the-fence type things with neighbours, where they can sort through it and pick the right product. But when we’re transporting hay considerable distances, with the cost of freight these days, they want to maximise their return. So, they’re buying quality hay and seeking advice from us to ensure that we find the right product to match their needs.

Jon Paul Driver  5:18  

That makes perfect sense. I love the way that you say ‘grazier.’ That’s not a word that we use here in the States. But I certainly understand the meaning here, whether you’re a grazier or a feedlot operator, you’re paying close attention to the quality of the hay. And what are some of the big things to be looking for?

Dave Clothier  5:38  

Well, when we’ve got the cooler months ahead, and pastures, depending on how hard the winter is going to be, and pastures get affected by frost, the big ones really are protein and energy, because that’s what the pastures are lacking. And that’s what they’re wanting to put in their sheds for winter. And as we go through weaning, when we get into that weaning stage, which is the first step, the really big one on that is obviously aroma and colour, to draw cattle to the feed and to educate them from day one to come to the feed.

Jon Paul Driver  6:15  

Ah, that transition from nursing and grazing to that dry forage product.

Dave Clothier  6:21  

That’s right.

Jon Paul Driver  6:23  

Our hay prices headed north or headed south. I mean, we’re talking pick a nice 8x4x3 oaten hay, what’s your crystal ball showing?

Dave Clothier  6:37  

Righteo, well, in the south like the export market is certainly holding up that surreal hay job with the oaten hay. There’s a few factors in play. And one of them is that the better quality hay is getting further away from where the larger cattle population is in Australia, that being in the north. So quality shedded hay is largely unavailable anywhere north of about Dubbo which is in central New South Wales. So the challenge going forward, I think will be that I feel that market price for cereal hays probably come back $30 to $50 a tonne on the highs that we experienced through production in 2023. When hay wasn’t even making the sheds it was leaving exiting the paddock demand was very high because we were in an El Nino type pattern at the time. And that drove demand. Now that we’ve got a flush of seasons and pasture quality is very high. I think when demand kicks back in in March that the price will come back slightly to that $30 to $50 per tonne reduction. But because it’s coming from further away, I’m not sure that delivered prices are going to change that much, because of distance.

Jon Paul Driver  8:01  

I think that’s a very fine point to put on that, the high quality hay is farther and farther, progressively farther away. So that just increases the freight costs. So if you’re buying hay in Queensland, for example, your freight is increasing even though the price of the hay is softened, you’re still net you’re paying about the same delivered price. 

Dave Clothier  8:22  

Yeah, so traditionally what happens because we’re travelling large distances with our fodder, what goes first is obviously the better quality hay with the highest bale weights because it has such a such a dramatic impact on the delivered price. So the guys with the you know, the sub 500 kilo bale weights unless it can find a localised home, it tends to be further in the season before we move it. So we’ve been sort of educating the market for a long time now about the importance of bale weight. And there has been a considerable difference. Just from memory, I think we’ve had an increase of about 16% in bale weight, which is a really positive story to tell there’s no doubt about that, because it does have an impact on the delivered price.

Jon Paul Driver  9:12  

Heavy bale weights make the product more sellable. And generally speaking for a higher price.

Dave Clothier  9:18  

Well, at the end of the day, this is not a hard game, the reality is we’re trying to match the right product to the right customer at the most competitive delivered price. So bale weight has a dramatic effect on that. And most of our growers that we’re talking to on a very regular basis now get that and the lower bale weight growers have to adjust their price down to compensate if they need cash flow short term.

Jon Paul Driver  9:51  

Now I worked for a bank and you said the magic words that trigger me; cash flow. How are livestock producers doing on cash flow? How are fodder producers, how are hay producers. doing on cashflow. What’s the perception in the marketplace?

Dave Clothier  10:05  

Look, I think it’s very strong on both sides of that fence apart from the feedlot sector who is challenged at the moment with higher commodity prices, on the back of high priced animals that are just leaving the yards. Now, they’ve got some challenges right now today, that’s for sure. But you know, long term as the market stabilises, they’re buying animals for a lower price, which gives them their margin going forward. Look, the reality is, because demands dropped off human nature is we need to move some product. So that will help or drive the market price one way or another. And I think it will go down slightly, you know, and it’s not long when you get through, by the time you get through winter, you’ve got growers pretty nervous about wanting to empty their sheds for new season. So that all plays into it. You know, as soon as it gets cold, people are wanting to move hay, and demand is increasing. So I would expect large volumes to be moved. You know, once we get into the cooler months.

Jon Paul Driver  11:17  

That almost sounds like advice to me… that maybe the expectation is right now, a realistic expectation for a hay or fodder grower is that you’re just not going to move that much volume right now. But to put some emphasis on marketing in the coming months to get that, hay down the road. 

Dave Clothier  11:39  

Yeah, and there’s been a big lesson for the industry in this summer we’ve just had in the amount of hay that’s been compromised, that is outside sheds. And I think growers are very, very aware of that. So I think there’ll be a push to empty the sheds a little bit quicker than there has been in the past to ensure that they can put new season hay and fill the sheds again.

Jon Paul Driver  12:05  

Oh, that’s a really important point, I hadn’t considered that if a grower had a shed full of hay from 2022 some rained on off grade stuff that hung over from the previous year, and they stack their nice new hay outside and it got ruined, they are going to be sensitive to that. 

Dave Clothier  12:24  

Probably more sensitive than in past years. Because it’s been such a widespread event. I think it’s going to be remembered for a long time.

Jon Paul Driver  12:32  

That’s a really important take and certainly sounds like everyone’s in the same boat. 

Dave Clothier  12:40  

Well people have long memories about these sorts of events. And what we’ve chosen to do in this this paddock stack type space, is to leave it to the growers to organise those sales themselves independently, under their own steam because we just can’t afford to compromise the outcome for all parties on hay that may have been damaged or been compromised since the initial test was done.

Jon Paul Driver  13:10  

You can’t expect to put rained on hay on a truck and cart it 500 or 1,000 kilometres and have somebody on the other end be happy about that.

Dave Clothier  13:18  

That’s exactly right. Yes.

Jon Paul Driver  13:22  

Feed Central’s actively doing something about this right. In your role at feed Central. How do you help growers and buyers meet their needs right now, under these conditions? 

Dave Clothier  13:34  

You know, we’ve expressed that demand is low, but the company is investing in infrastructure and people and so forth. So what are we doing now? Right now today? I wonder whether we should make some sort of a statement. And then that being we’ve got our people on the road with key growers and key buyers to help understand their needs going forward in our downtime.

Jon Paul Driver  13:59  

Dave, thank you very much for your thoughts today. Again, I’ve been joined by Dave Clothier, the National Sales Manager at Feed Central, and he shared some really valuable insights around the condition of the crop, some expectations around demand, talking about the livestock sector. It’s just been a fantastic discussion. This podcast is proudly presented by Feed Central. Stay tuned for upcoming episodes. We’ll continue sharing and learning more together.