1. 2008 Washington State Hay Situation and Outlook J. Shannon Neibergs 1, William T. W. Woodward 2 and Phil J. Peterson 3 1,3 WSU Extension and 2 Columbia Basin College

2. Facing Agricultural Producers...Challenges...  “Fight for Food or Fuel”  Structural Change in Supply Response  Globalization  Marketing

3. Light Crude Oil (CL, NYMEX) Monthly Price Chart

4. Monthly Buy – Sell and Reinvest Hypothetical $100,000 Investment Light Crude vs WA Alfalfa Hay 20062007 $ROI %$ Light Crude $5,6305.6% Alfalfa Hay$17,39117.4%

5. Monthly Buy – Sell and Reinvest Hypothetical $100,000 Investment Light Crude vs WA Alfalfa Hay 20062007 $ROI %$ Light Crude $5,6305.6%$42,94142.9% Alfalfa Hay$17,39117.4%$21,73921.7%

6. 2007 California Drought Increases Forage Demand

7. WA Acres Harvested All Hay Acres up 20,000 acres +2.6% Alfalfa Acres down 10,000 acres -2.3%

8. WA Hay Production and Yield All Hay up 173,000 tons +5.6% Alfalfa up 80,000 tons +3.7%

9. USDA Annual Alfalfa Cash Price Hits Record High in 2007 $138

10. USDA Annual Average Price Cash versus Deflated Prices Price deflation index, 1982 = 100 $138 $67

11. 2007 PNW Hay Supply Statistics Small Change from 2006 to 2007 All HayAlfalfa Acres acres3,290,0002,030,000 change tons (2006 to 2007) -50,000-20,000 % change (2006 to 2007) -1.5%-1.0% Production tons11,679,0009,116,000 change tons (2006 to 2007) -410,000-6,000 % change (2006 to 2007) -3.4%-0.1%

12. Dairy Cow Geographical Concentration

13. Continued Growth in Idaho and California Cow Numbers

14. 2007 Milk Price Reaches Record High

15. 2007 Milk Price – Record High http://www.ams.usda.gov/dairy/mncs/graphs/DY20070105aClassIII.pdf

16. The Feed Pyramid for Dairy Cows http://www.extension.umn.edu/dairy/dairystar/05-12-07-Paulson.htm

17. California is clearly a hay deficit state Idaho’s index has increased from 46 in 2000 to 66 in 2007.

18. Other Domestic Demand Factors Steady beef cattle and Calves January 1 inventory Horse Numbers - Unknown but Willing to Pay for Quality Hay

19. Exports

20. Year to date Pacific Rim Hay Imports From ALL countries 1.2007 YTD total Pacific Rim imports are 99% of 2006 2.Japan small decrease offset by Korea increase 3.USA captures 91% of Korean increase 4.Not shown by graph, but in the data USA exports increase 83,427 metric tons from ’06 to ’07 – a 4% increase

21. West Coast Forage Exports to Pacific Rim Source: Port of Portland

22. Exchange Rate Trends Note “strengthening” of the Loonie and relative “weakening” of the Yen

23. China’s Emerging Alfalfa Demand

24. China as a Hay Export Destination

25. 2008 Hay Outlook Current Production 7,195 Mil. Gal. Expansion Capacity 6,960 Mil. Gal. http://www.card.iastate.edu/research/bio/tools/ethanol.aspx

26. All Hay Stocks and Production http://www.nass.usda.gov/Statistics_by_State/Washington/Publications/Agri-facts/agri2may.pdf Washington end of year stocks are tight – PNW stocks are very tight

27. Monthly Price Trends for WA Alfalfa Hay Consistent June price spike Continually increasing price trend since 2006 $15 per ton increase in 2006 and $25 per ton in 2007 Average 2006 2007

28. California is the Price Leader in the Hay Market http://alfalfa.ucdavis.edu/#acreages

29. Comments and Questions