July 2026 Hay Report

July 11, 2026

Retro: what this forecast got right and wrong [GRADED Aug 8, 2026]

Date: July 11, 2026 Market: Southeast Colorado Premium large-square alfalfa, $/ton ex-stack (McClave / lower Arkansas Valley) Replaces: the April 18, 2026 forecast (research/08). Full accuracy grading and data trail in research/09-forecast-update-2026-07.md.

TLDR

Hay prices in SE Colorado did what we said they would in April: they went up, fast, and landed almost exactly on our forecast. Colorado alfalfa (state average) rose $165 → $170 → $190/ton from March to May, and the market printed a 2,000-ton SE Colorado alfalfa contract at exactly $225/ton — the seller's ask — with current first-cut asks at $250. The local water year is now confirmed as the worst in recorded history: the Fort Lyon Canal is running zero cfs in all four divisions as of today, the Fry-Ark Project allocated no water for the first time since the 1970s-era drought years, and John Martin Reservoir is below crisis level. That keeps prices firm and rising through the winter — we forecast a peak of about $255/ton average in January–February 2027.

But the two-year price blowout we left open in April ($300–340 hay next spring) has been mostly taken off the table by three things that broke against higher prices since then: the Texas/Oklahoma drought collapsed under June floods (killing the out-of-state bidding war), diesel fell 19% when the Iran war ended, and — most important — a very strong El Niño winter is now ~4-in-5 likely, which historically delivers the southern-Colorado snowpack that crushes hay prices the following spring. Ride the winter strength; don't hold hay past the snowpack verdict. If December 1 snowpack is already at or above normal, sell everything by Christmas.

Price Prediction

State-average NASS alfalfa runs roughly $35–55 below these numbers (it's all qualities, all bale types, statewide). The corrected statistical model puts state all-hay at $191–196 through January and ~$203 at the April 2027 peak; the grid above adds the observed SE Premium spread and judgment on the factors the model can't see.

Why We Believe This

1. The forecast is already verifying against real trades

This is not a theoretical curve — the first three months are graded. In April we forecast May/June/July averages of $210/$225/$235. What actually printed: NASS Colorado alfalfa hit $190/ton in May (+$20 in one month, +$30 y/y — implying ~$205–225 on SE Premium basis), USDA's June 4 report showed a 2,000-ton new-crop alfalfa contract at $225.00/ton delivered-feedlot in SE Colorado plus a $270/ton old-crop Premium stable lot, and the July 2 report carries a $250/ton FOB ask on covered first-cut 3x4s. Every print sits inside our April bands. Meanwhile the raw regression model — trained on 2015–2024, a period with nothing like this water year — undershot May by $26/ton, almost exactly the $30–50 upward adjustment we applied in April on the argument that supply curves go vertical outside the training distribution. The method is working; we kept it and re-based it on the new actuals.

2. Local supply has failed beyond our April worst case — this is the floor under prices

Every leg of the lower Arkansas Valley's water supply broke at once, and all of it is now confirmed fact rather than forecast:

• The Fort Lyon Canal — the seller's own ditch — is at 0 cfs in all four divisions as of today, with the board pulling water back to the top of the system in early July, when normal years run into fall. June diversions were ~8,000 AF vs 39,000 AF last June (21%); March–June totaled 36% of 2025, and 2025 was already a weak year. FLCC's storage accounts are nearly empty: 3,600 AF at John Martin, 600 AF at Meredith, zero Adobe/Pueblo winter water.
• The Fry-Ark Project allocated zero water for 2026 — only the second time in 54 years. Transmountain imports will be under 1,000 AF against a 60,000 AF average. Nothing supplemental is coming.
• Arkansas basin runoff came in at 33–38% of median with melt-out 36 days early; the upper river is at the lowest flows in recorded history. The river at Las Animas — the closest gauge to McClave — averaged 12 cfs over the last 30 days.
• John Martin Reservoir holds 26,085 AF (~7.5% of its pool), below our 30k AF crisis trigger, on 18 cfs of inflow. 38 administrative calls are active in Division 2 (27 in April), with mainstem calls at 1874/1884 priorities — water rights younger than 1874 are getting nothing.
• Bent County is now 85% D2, 33.5% D3, and 7.5% D4 — and the D4 pocket added on July 1 is northeast Bent County, i.e., McClave itself. The Governor declared a statewide Drought Emergency (Phase 3) on June 4, the first since the 2002/2012-class droughts. Both Bent and Otero carry USDA disaster designations.

The consequence is arithmetic: FLCC ground got a diminished first cutting on runs 4–5, the second cutting is in jeopardy with the canal dry, prevent-plant acres are rising (USDA's own report language), and Colorado entered this failed season with hay stocks already down 32% year-over-year (440k vs 650k tons on May 1). Local supply cannot recover in 2026 no matter what happens now — that's why near-month confidence is High.

3. Demand is strong enough to hold the price up — but capped

• Cattle: feeders at ~$360/cwt (+15% y/y, records), beef cow numbers at cycle lows with no rebuild expected before 2028 — ranchers have both the need and the money to feed. Colorado range is 57–63% very-poor/poor, so winter feeding will start early and run long.
• Dairy: the US herd is at a 30-year high (9.67M cows, +184k y/y) — alfalfa volume demand is structurally strong, though June Class III at $15.98 limits what dairies will pay for the top grade.
• Nearby drought demand didn't vanish, it shrank: the TX and OK Panhandles (county DSCI 294–388) and northeast New Mexico (Colfax 393; NM alfalfa at $265/ton in May) are still deep in drought — the buyers physically closest to McClave still have to buy.

4. But three April assumptions broke bearish — that's why the winter/spring forecast came down

• The Texas/Oklahoma bidding war is over. Tropical Storm Arthur and June rains took TX DSCI from 285 to 92 and OK from 311 to 162; Kansas is nearly drought-free (74). Our April thesis leaned on southern-plains dairies bidding into SE Colorado — that hit its low-end trigger instead.
• Kansas is sitting on +70% hay stocks at $123/ton alfalfa. Cheap grinding hay two hours east caps what feedlots will pay for anything but quality and proximity. (That SE feedlots still contracted at $225 tells you how much local scarcity is worth — but the cap is real.)
• The fuel shock reversed. The April diesel price ($5.64) was an artifact of the Iran war and Hormuz closure; the June 18 armistice took Brent back to $72–75 and diesel to $4.58 and falling. Freight-cost support we penciled in is gone. (Fertilizer is the one cost still elevated — nitrogen PPI 172, +43% y/y — which floors 2027 new-crop asks but doesn't move this winter.)

5. El Niño is the reason we cut the spring-2027 spike — the single biggest change since April

In April, the February 1, 2027 snowpack reading was a coin flip that swung our spring-2027 range by $100+/ton, and we left a $340 high tail open. It is no longer a coin flip. CPC issued an El Niño Advisory on July 9: Niño-3.4 at +1.2°C, a 97% chance the event persists through early spring 2027, and an 81% chance it reaches "very strong" by October–December. Strong El Niño is historically the most favorable phase for southern-Colorado/Arkansas-basin winter snowpack, and the best precedent in our own dataset is blunt: the one above-normal snowpack of the decade (2024) knocked Colorado alfalfa down $60/ton in a single year. We now put ~70–75% odds on a normal-or-better 2026-27 snowpack — so the two-year-drought scenario ($320–340 hay) is demoted to roughly 1-in-4, the forecast peak moves earlier (Jan–Feb, not March), and the spring 2027 average drops $25–40 from the April table. The residual 1-in-4 is real — dry El Niños happen in southern Colorado (2015-16 underdelivered) — which is why February still carries the widest band.

The near-term weather also leans mildly bearish: the monsoon is arriving (late, but CPC flipped SE Colorado to leaning above-normal for July–September, and Lamar + Las Animas have already logged 2.78" combined in the first ten days of July against our 6-inch two-month relief trigger). Rain now helps dryland grass and any hay ground with a working ditch — it does not resurrect the Fry-Ark allocation or refill John Martin.

6. What this means in practice

The price path is a rising wedge into deep winter, then a managed descent — not a blowout. For anyone holding hay: current strength ($235–250) is a good market to sell into; the January–February window (~$255 avg) is the forecast peak and the last good exit; and the discipline rule is now sharper than in April — if the December 1 basin snowpack is already at or above normal, sell remaining inventory in December rather than waiting for the peak, and in no scenario hold past the February 1 snowpack print. The one number that decides whether spring 2027 hay trades at $205 or $305 is still that snowpack reading; everything we've learned since April says it's more likely to come in fat than thin.

Data as of July 11, 2026. Sources: USDA NASS Agricultural Prices (agpr0426/0526/0626) & May 12 Hay Stocks & June 30 Acreage; USDA AMS Colorado Direct Hay Report (Apr 9, Jun 4, Jul 2 tables; HPJ reprints for intervening narratives); Fort Lyon Canal Co. water report (flcc.net, 7/11); Colorado DWR CDSS diversion records & Division 2 calls; USACE John Martin morning report; USBR reservoir data; NRCS May 1/June 1 Water Supply Outlooks; US Drought Monitor API; CPC ENSO Diagnostic Discussion (7/9) & seasonal outlooks; EIA weekly diesel; BLS PPI; World Bank CMO; SECWCD/Ark Valley Voice/CPR/Colorado Sun/Kiowa County Press reporting. Full citations and the graded April-forecast scorecard: research/09-forecast-update-2026-07.md.