Hay Acreage in the Southeast

 

The USDA Acreage report was released by the National Agricultural Statistics Service this past Friday. This once a year report usually grabs headlines due to its estimates of acreage of crops such as corn, wheat, cotton, and soybeans. It is often one of the most volatile trading days for those commodities as markets absorb the newest information and traders adjust their forecasts for future production.

The USDA Acreage report was released by the National Agricultural Statistics Service this past Friday. This once a year report usually grabs headlines due to its estimates of acreage of crops such as corn, wheat, cotton, and soybeans. It is often one of the most volatile trading days for those commodities as markets absorb the newest information and traders adjust their forecasts for future production.

While row crops grab most of the headlines, this report also sheds light on hay production for the past year and provides estimates for the upcoming year. Most hay producers in the Southeast are firmly in the middle of another hay season and this report provides estimates on what hay producers in each state and around the country are doing this summer.

Acreage of hay production in the Southeastern U.S. is expected to grow by 6.5 percent in 2018 as compared to 2017. This would be a 755,000 acre increase. This would be the first increase in hay acreage for the region since 2013 and only the second since 2008.

Missouri accounts for the majority of the increase in the Southeast region with 530,000 acres more hay than during 2017. This would be a 17.7 percent increase. Tennesse is next with a 103,000 acre increase and Kentucky is third with a 90,000 acre projected increase. Mississippi is expected to have slightly lower hay acreage – down 20,000 acres or about 3 percent.

For the U.S. as a whole, hay acreage was steady from 2016 to 2017 but USDA is projecting a 1.3 million acre increase in hay acres in 2018. This would be a 2.4 percent increase. Missouri is forecasted to see the largest increase in the U.S.

So what is driving these trends? Anytime hay acres increase or decrease, that land is instead used for something else. This is usually driven by the economic concept of opportunity cost which refers to the value of the next best alternative use. I mentioned that 2018 would be just the second year of increased acres since 2008. The two year period of 2007 and 2008 was the beginning of a record high grain prices that led farmers to pull as much land as possible into row crop production. In the following years, the opportunity cost of hay acreage that could instead be planted in corn or soybeans was really high.

However, corn and soybean prices haven’t touched those record-high levels in the last few years. In fact, the margins in most row-crop production have been very slim for most commodities. That has farmers considering the opportunity cost of land again. The projected boost in hay acres in the Southeast suggests that some producers – especially in Missouri – are placing a higher value on hay production than their next best alternative.

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