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Commodity upswing helps alfalfa growers, but the timing could be better

20190529-bc-features

With a break in the weather, a swather operator from Crown Harvesting Inc. cuts alfalfa later than it would typically prefer in this 2019 file photo.

If the recent run-up in ag commodity prices seems like a great thing for Kern's farming sector, think again.

Only one of the county's top-10 crops — alfalfa — has benefited noticeably from recent bad weather in Brazil and strong Chinese demand for grains that feed livestock. And unfortunately for local alfalfa growers, the timing's all wrong.

Problem is, California finds itself in another drought, and because alfalfa is a relatively water-intensive crop, growers often must pay top dollar to supplement meager supplies for irrigation.

On top of that, the amount of local acreage devoted to alfalfa has plummeted in recent years. Now that prices are up strongly, the county's ag sector has limited capacity to capitalize, to say nothing of how the crop's price increase hurts Central Valley dairies that feed alfalfa to their herd.

Buttonwillow farmer Mike Frey grew his last alfalfa field two or three years ago. He ultimately decided the profit margins were not strong enough to justify the amount of water required for irrigation.

"We got out of it," he said. "We could achieve better results with different crops (using) the same water."

WEIGHING FACTORS

Alfalfa specialists say things are different now.

Blake Sanden, an advisor emeritus with the University of California Cooperative Extension program, said by email farmers comparing crop prices, land requirements, production volumes and water needs may find alfalfa's suddenly the way to go these days.

Growers with aging almond orchards may do the math and find it makes more sense for the time being to switch the land to alfalfa production.

"Maybe I put my water into the hay and plan on tearing out the old trees," he said email, speaking hypothetically.

Kern County records show Alfalfa ranked eighth by gross revenue to local farmers in 2019, the most recent year for which data is available. That year the crop brought in $141 million, up almost a quarter from 2018, even as the county's total acreage was down year over year.

Compared with 10 years earlier, the amount of land devoted to growing alfalfa in Kern in 2019 was down 56 percent at 64,100 harvested acres, according to county records.

RISING PRICES

RaboResearch Food & Agribusiness reports U.S. alfalfa prices through February were trending higher than the year before and running substantially above the five-year average.

Roland Fumasi, senior analyst at RaboResearch Food & Agribusiness, said tight corn supplies have been a significant contributor, along with Chinese demand and supply constraints in South America. Unless California's drought resolves itself soon, he said, it's likely prices will continue upward.

In the meantime, water prices for those without their own adequate supply have risen from $530 per acre-foot in mid March to more than $800, Fumasi noted, adding some growers will have to use more groundwater to irrigate their crops — "no doubt about it."

Meanwhile, he said dairies experiencing mediocre milk prices face margin pressure to the extent they need to supplement their feed supplies with grains.

Fumasi added that prices for pistachios, another leading crop, are relatively stable while almond prices lag. Citrus is up year over year but the crop hasn't kept pace with grain price increases, he noted.

A California dairy representative, Michael Boccadoro, said the industry has grown somewhat cushioned from high alfalfa costs because of greater use of ag byproducts for feed.

GOOD YEAR

Daniel Putnam, a forage specialist at the University of California, Davis said those still growing alfalfa locally should enjoy good profitability this year "if they have water to grow the crop."

He noted most buyers of alfalfa are local but that probably more than a quarter of California's production of the crop goes for export.

Putnam pointed to a bright spot: alfalfa's flexibility in comparison with crops like almonds. Growers can drop irrigation levels to between 50 percent and 60 percent of full allocation and still do OK, he said.

"Yields will be lower but still can be profitable," he wrote in an email. He added that another benefit is that alfalfa planted in fall can still produce within one year, which tree nuts cannot.