Record high hay prices could stay up, or tumble dramatically, with a leading analyst describing the current market as "bizarre."
Jumbuk Ag's Colin Peace said 2018 saw hay prices hit record heights, spiking at just over $400 a tonne, due to the extended drought down Australia's east coast.
"Although the current prices have eased by about $40 a tonne, prices are well supported," Mr Peace told a Grains Research and Development Corporation forum.
He said last year saw large areas of cereal and canola cut for hay, much of which remained on-farm.
"Hay prices are high, but can change rapidly, according to weather patterns," he said.
Demand ramped up from April last year, with NSW and Queensland graziers buying carryover hay.
'This demand continues this year and the extended road train network, in Victoria, is helping the huge northern-bound freight task," he said.
Last year, about 15 per cent of the area sown to wheat and barley in Victoria was cut for hay, albeit at low yields.
Canola, first cut in early to mid-flower, was testing at 17 to 19 per cent protein, an average similar to the drought of 2006.
"Summer demand for protein hay has been increasing, particularly as vetch hay supply is greatly reduced this year and most irrigators are no longer watering their lucerne stands," he told the forum.
Mid-December rain on pastures in Gippsland and the western districts also saw extended grazing on green pastures and generous volumes of hay and silage in those regions.
Mr Peace predicted a guaranteed minimum price for top grade oaten hay for the 2019/20 season of $250 a tonne, delivered to local hay processors.
Victoria's eight export plants had been actively competing in the local market, while Chinese demand remained strong.
Two new hay plants were expected to open at Raywood and St Arnaud, this year.
Following the forum, Mr Peace said while the market was at near all-time record prices, a sharp drop was coming.
"We just don't know when," he said.
"It's a bizarre market - there are strong reasons to see the market stay up, and strong reasons for the market to plummet," Mr Peace said.
Prices could stay up due to very low carryover of stocks, early demand from NSW and Queensland, a shortage of Mallee vetch and irrigators pulling out of lucerne.
"There's still sufficient demand to maintain these high levels, if buyers are prepared to pay for hay,"he said.
It's a bizarre market - there are strong reasons to see the market stay up, and strong reasons for the market to plummet.
Alternatively, the northern dairy herd cull, a big hay and silage season in the south, more cereal crops being cut this year and a fall in demand from NSW could push prices down.
"There are not too many buyers in southern Victoria, the dairy farmers there have had a terrific season, and they have a lot of hay and silage, in front of them."
And he said while the cost of grain, hay and water was crippling the northern dairy industry, many cows were being moved south.
"I think a lot of those herds have just relocated, they have been sold down into Gippsland," he said.
"They are still eating hay, but they are eating hay and silage down south, not in the Goulburn Valley."
But he said the massive exodus of cattle from the NSW herd would also have an impact on hay sales.
"Farmers are saying 'I'm not going to feed my commercial cattle any more, it's crazy to pay this stupid money for hay'," he said.
Mr Peace said he didn't think the demand would be anything like last year, putting further downward pressure on prices.