THE lucerne industry has been hit by a double whammy - export sales of seed are plummeting and demand from dairies for hay is drying-up because of low milk prices.
Many growers who cashed-in on record seed prices of $5.50 a kilogram and above in early 2008 are still waiting to be paid for some of their 2008-09 season crop, just months out from the next seed harvest.
The Upper South East produces about 90 per cent of the nation's lucerne seed and 80pc to 90pc of these volumes are exported.
But well over half of the 2009 harvest is still sitting unsold in seed companies' cleaning sheds.
Lucerne Australia chairman Shane Oster said 2009 was the first time in many years supply had outstripped demand.
It was not only the weak global economy but issues in major markets such as a debilitating drought in Argentina and high slaughter rates of dairy cows in the United States causing cashflow issues for lucerne growers.
"People are really struggling financially and are starting to come into a lot of expenses - they have fertiliser and diesel costs for the next Lucerne production year and they have not been paid for the last one," Mr Oster said.
Publicly-listed varieties, such as Siriver, had been particularly hard to shift, and significant dryland areas had been taken out of seed production this year.
Despite this, there was not enough sales activity to give a price indication for the upcoming season.
"In the past a lot of buyers missed out if they did not hop in and buy the seed, but last year there was plenty of seed available so why buy two to three months before you need it," Mr Oster said.
"A lot of people if they were offered $3.50/kg for lucerne would probably take it but it is not a matter of price more just people not buying," he said.
He was confident sales would rebound in the short to medium-term.
"It is not as if people don't want lucerne anymore - it is just one of the ebbs and flows of the marketing life cycle," Mr Oster said.
He said hay yields had been above average with good late spring rains compensating for less water applied to hay crops. But there was a large amount of weather-damaged hay.
Reasonable quality lucerne hay was fetching $170 a tonne to $200/t, although sales straight out of the paddock had been slow with less dairy cows to feed in southern Australia.
Cuts to irrigation allocations, ranging from 40pc to 50pc over a five-year period in many of the Upper SE lucerne-producing areas was a major challenge.
But growers, forced to deepen their bores in the past couple of years, understood the need to manage the underground water source in a sustainable manner.
"It is right at the forefront of everyone's minds that the aquifer is in decline so they are accepting that something needs to change - everyone has taken the cuts on board well," Mr Oster said.
Growers had sacrificed watering hay crops in favour of seed crops, and estimates in the Hundred of Stirling were that the irrigated seed area had reduced by only 5-6pc despite a 16pc annual cut in water volumes.
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