How Hay Prices Are Determined

Compared to grain, hay prices are much less transparent because a greater proportion of hay is traded directly from farmer to farmer, and hay marketing tends to be more by word-of-mouth. Even so, an increasing proportion of total hay production is being traded, and an identifiable hay market does exist. As we pass through the yearly calendar of autumn planting, fodder users start to develop expectations about the size of next season’s hay crop and its quality in each region. In spring, when the quantities of pasture production in each region become apparent, and it is clear whether or not grain crops will successfully yield grain, expectations about new season hay volumes and possible prices further develop. However, it is not until crops are cut and baled that the initial hay price benchmark is determined. This is usually based on what hay and straw exporters are willing to pay in mid September. Domestic hay prices usually settle in excess of export prices due to competition between domestic buyers in south-eastern Australia.

Other factors that then influence hay prices include:
• quantities of hay in storage and % sold within the year;
• livestock users’demand and capacity to pay;
• substitute costs (other fibre sources, other energy sources such as grain, other protein sources such as
lupins); and
• payment for quality.