California’s hay and alfalfa markets are facing one of their most challenging seasons in recent memory, and a major reason is hiding in plain sight: tariffs.
“China used to take up to 300,000 tons of our hay per month. Now they’re taking 10% of that.” — Nick Folio, Folio Commodities
With overseas demand falling, the Central Valley is drowning in hay that should’ve been exported. Around 600,000 tons of surplus forage has entered the local market, driving prices down and creating a placement crisis for farmers and dairies.
Why It Matters
- Alfalfa is being replaced in rations by cheaper commodities like canola and almond hulls
- Domestic inventories are swelling without relief from export buyers
- Even with tariffs temporarily paused, no real demand rebound has occurred
“This hay market has no momentum behind it. If anything, it wants to soften.”
Freight Adds Fuel to the Fire
The trucking industry—already battered by high fuel and insurance costs—is operating at a loss:
- Freight rates are at 10-year lows
- Fuel, maintenance, and regulatory costs are at all-time highs
- Some ag-based haulers are registering out-of-state just to survive
“There’s no dollar to be made in trucking today. The state eats it all.”
What Comes Next?
As more hay hits the market from Oregon and Nevada, and exports remain quiet, the downward pressure could intensify. Without structural support or new trade avenues, California’s forage economy may face an even rockier summer.
Full interview script:
AgNet West Nick Papagni “The Ag Meter” talked with Nick Folio from Folio Commodities about the hay and alfalfa market.
How’s it looking especially after tariffs were announced and almost heading into June?
You know it’s basically the same market here today with maybe a little bit of additional downward pressure. So, throughout the winter months you had that carryover of inventory, particularly on your out-of-state ranches, without having the export outlet because of the uncertainty in the tariff. You had a fair amount of inventory come into the Central Valley.
And when I say a fair amount of inventory, here’s some numbers to put into perspective. China was shipping anywhere between 2,000 to 300,000 tons a month of our inventory, Idaho, Utah, Western Arizona, Nevada, of baled forages of both combination between grass and alfalfa. Call it three and a half million tons a year is what China was absorbing.
Now, with uncertainty in the tariff, they’re taking anywhere between 20,000 and 30,000 tons a month. So that’s 10%. You know, obviously there’s some other outlets, some of that hay went into parts of Colorado, parts of Texas to satisfy either the beef market or their dairy needs.
Some did stay domestic going elsewhere. But just going into the Central Valley alone, you know, even if you only have 20% of that carryover that should have gone to export, that’s 600,000 tons that got shipped into the Central Valley throughout these winter months, that should have been overseas. And you feel it here, as we get a little bit farther into this hay season, we’re now basically done and through a wheat silage season here.
These dairies have a lot of feed on hand; they have a surplus of inventory of both silage and baled forage. Placing this local hay from a week-to-week standpoint is as labor intensive as it’s ever been. You will have more hay even come online here within the next two weeks as your Southern Oregon, Western Nevada ranches start to put hay into bale.
You know, that’s going to be looking for a home and with no change in the export market, that’s going to stay here. The commodity market has a couple other factors to it that’s providing some of this downward pressure, one of them being the canola price. The canola price is very favorable for the dairymen.
So that’s a cheap protein and it’s a stable in the ration. And it’s affecting the wheat silage price, your alfalfa price, corn is competitive. So, you’ve got some cheap commodities right now that this alfalfa market is having a hard time to compete against.
Almond holes are down. Alfalfa is replaceable to the dairymen in their ration by cheaper feeds. So, you definitely have some hurdles to get through and to jump over throughout this hay season to continue to place inventory.
Well, with the tariffs being announced, will you try to work in some tariff programs?
You know, it was put on a sideline. You do have maybe a little bit additional trading of American owned companies that are in the export business to China, but really, really quiet activity there. You had a fair amount of hay get purchased during the election process and it is actually just getting shipped now.
If you see maybe a little increase in your actual shipping tonnages, it’s hay that was previously purchased and not purchased under this tariff restriction. That has not really changed at all. Even though the tariffs have been sidelined for 60, 90 days, it doesn’t seem like it’s affected the market really at all.
What does this do to the dairy market when the hay and alfalfa start to stack up?
For sure. From a farming standpoint, very, very tough today in several commodities, obviously, dairy commodities being one of them, your wheat silage, forecasting corn now, you know, your corn silage price is going to begin to get talked about. The alfalfa market is soft with potential of maybe even getting a little bit softer going forward.
I don’t think that this hay market really has any momentum behind it to firm up. If anything, it kind of feels like it wants to soften a little bit. From a dairy standpoint, sure, milk is stable, which is nice. Milk has been pretty volatile the last three years now between 2022 to today. Between the commodity market, interest rates and milk really across the board have been extremely volatile the last three years. And for the first time, it feels like it’s starting to kind of level out a little bit of a combination between milk being stable, the commodity market being stable price-wise, not having big influxes in it.
It’s stable at what is less than favorable price on the farmer and the grower side of things, but it is still a stable market. Dairymen seem to have a positive outlook. The milk price would but a dairy is able to pay their bills and hopefully knock down some of this additional debt that could be there, especially at the higher interest rates that we’re still experiencing.
The next 30-day forecast, is there any bright, good news coming in for the dairy hay alfalfa world?
Maybe a little positive there is that when the out-of-state hay does start getting made, it’s typically first cutting. Nevada, Oregon, Idaho is going to be some really nice, high test, hopefully clean, dry, no moisture.
If weather cooperates, no rain. Having some really, really nice hay online and getting traded is always a great thing for the market. When you have a lot of rain on or higher weed percentage or higher grass percentage, when you’ve got a filler commodity and a dry cow category of alfalfa constantly getting traded, it really starts to just have a glut of it in that bottom end price.
So, getting some nice hay online over the next 30 days should be a positive in the alfalfa market.
You know one thing we never talk about, and it’s huge because you’re in the trucking business as well as being in the hay and alfalfa market, we’re going to talk about freight in California. This is going to be an eye-opener. be nice to see if it was another dollar or two better than where it is today.
I want to ask Nick, how big is the freight, especially in California?
It’s got to be horrible. You know, for an everyday guy, you would assume that with the fuel being as high as it is, with the cost of equipment, the cost of insurance, constantly fighting labor increases, right? And hey, to the employee’s benefit, I agree. They need to be making more all the time as your cost of living continues to go up.
One would assume that the trucking rates would be increasing. Not the case. The freight rates, you know, the freight that you’re competing against, whether it be, you know, dried goods or everyday freight for Amazon or UPS or Pipe or whatever, right, on what’s called a load board, the freight that you’re competing against is pennies on the dollar for where it actually needs to be.
So brokers are using those freight rates to their advantage to transport some of this Idaho and Utah hay in that would have normally been more competitive and brought, needed to bring a higher price on the delivered side of things because you had a certain freight standard in there. But there’s some of the cheapest freight that’s going down the road right now from a rate standpoint that’s been in the last, gosh, maybe 10 years. The only ones that I think are operating at a loss that these freight rates are the trucking companies themselves.
By the time you purchase that new $250,000 truck and you hook it up to an $80,000 trailer, you pay your outrageous California insurance and your, you know, high minimum wage or honestly quite a bit higher than what minimum wage is to continue to have a good dedicated driver in that seat. There’s a very good chance that our trucking companies are operating at a loss today.
How can truckers survive right now in California?
The way that this freight would be more competitive in California has to be from lowering and insurance.
Insurance companies are going to continue to raise their premium until you are either forced to go out of business or forced to find a secondary option, which I don’t think insurance companies, you see it on the housing side as well, insurance companies are going to price themselves out to where they, because they don’t want to operate in California. They don’t really even want to be here. So, they’re going to price it to say we’ll be so high that it’s going to be, it’ll justify us to continue to operate.
So, we need to lower the fuel price. We need to lower insurance. It’d be great to get some road repairs done. So maybe your service bills can come down a little bit. And to back off on your air resource board regulations, you know, a $225,000 truck is great today, but because you would think, oh, it’s a brand-new truck. I really shouldn’t have a whole lot of service bills, but because of the sensors and the regulations and having to burn diesel exhaust fluid, your $225,000 truck may cost you $25,000 in repairs in the first 100,000 miles.
How is that sustainable? It’s not.
Are truckers thinking about, we won’t do business in California. We better go to another state.
I don’t know how many smaller family-owned trucking companies have the means to actually pick up and move out of state. But yes, there are some that are, especially that are ag-based that are going out of state or at least opening up a PO box out of state and registering their equipment elsewhere, because your cost of registration is higher here than anywhere else in the nation.
And this is not only hay or alfalfa or silage. This is for nuts and everything else, correct?
Yeah. This is the entire trucking industry as a whole.
You are always spot on about the market, but yes, people don’t realize when you see the big 18-wheel trucks going down the road what they’re battling against. We don’t give them enough love, enough credit.
There’s no dollar to be made in the trucking industry side of things after our inflated insurance rates and what we pay in fuel. Any dollar that was to get made there is absorbed by the state itself.
There’s no doubt about it. We have to figure this out.
100%. You have to transport goods. Trucks feed the world in more ways than one, for sure.
Farming is already tough enough. Now we got freight and fuel. I don’t know where it ends.
The entire ag industry as a whole definitely is going through an adjustment period.
And then trying to get water in California. So, California, this is a breaking point for California in so many situations. And water is one of them. Freight’s one of them. Land. You’re a farmer. What do you see out there in the future for farming?
I think it depends on what irrigation district you’re in, if you’re in one at all. If a guy farms some ground and it’s in an irrigation district that historically has decent water and he’s able to get some allocation there, this almond market seems like it’s really started to rebound. We are actually experiencing a little bit better demand from American almonds post-tariff because China and some other countries actually did the entertain purchasing their almonds elsewhere from Australia, New Zealand, and they weren’t happy with the quality. Poor farming practices, less quality of soil. They didn’t have the nut size. And so we’ve actually got back majority of those buyers.
So, we’re shipping almonds. The almond market and the almond price is a reflection of that. The pistachio price is still strong.
Permanent crops as a whole have rebounded a little bit and are looking like a positive outlook with exception of your wine industry, your vineyard as a whole. The raisin market’s still soft. It doesn’t seem like you could pull out enough Thompson raisins to make that price really change at all. It’s always constantly hanging around that same dollar amount. You know, some of these raising guys are accepting the same price today as they did 10 years ago when it cost them half as much to farm. So, it really depends what irrigation district you’re in and it really depends what commodity you have planted here.
Long term, if some of the parts of California that are in a non-irrigation district, you know, what’s called a white ground, if we continue to tighten up their farming capability, you know, by 20 or 40 or 50 percent of their acres that they actually own become farmable, then this permanent crop outlook should remain strong just from a lack of inventory standpoint as your water continues to tighten up.
I think you opened a lot of eyes today how bad the freight is out there, especially California with gas prices, is not going to get any better.
You know, that freight comes from somewhere, right? So, it’s a combination of coming out of the grower price that they should be getting and the remainder of what needs to get absorbed gets tacked on to the at the store.
So, if we could figure out a way for the freight rates to be stronger, trucking companies to be better by lowering expenses, lower our fuel costs. We need to lower insurance costs. We need to, and by lowering your fuel costs, you know, you’re also going to be lowering your costs of your tires.
I mean, by lowering your fuel costs alone is big. If fuel is now twice as high or two and a half times as high as it was just eight or ten years ago, and the freight rates today are either identical or maybe even less, so your expenses and your inputs are higher to produce less revenue.
I think you’re a future politician, Nick Folio from Folio Commodities. I think that could be in the cards. You’re on your game today.
Well, let’s see. I trade hay and that market doesn’t seem that great. I own a trucking company and that doesn’t seem that good, and I farm. So, so far, I’m 0 for 3. Well, Nick, this has been great.
Thanks for keeping us updated. I know my Ag Meter people love you out there, and I get a lot of emails. Appreciate the time and everything you give to our show, so I appreciate it.
Oh, I appreciate you calling. I always love getting on and giving my two cents. I hope it’s appreciated.
Thanks a lot, Ag Meter. I’ll talk to you later. All right.
Thanks, Nick. That was Nick Folio from Folio Commodities.