From scarcity to strategy: Designing hay markets to mitigate feed shortages and income shocks

Grassland-based forages — such as grass, silage, and hay — are a key feed source for dairy cows. In the transition to more sustainable dairy systems, grassland-based production is increasingly valued for its contributions to biodiversity and regional resilience. However, droughts reduce grassland yields and raise feed prices, challenging farmers to secure feed and stable incomes. Existing coping strategies, such as early slaughter or livestock sales, can have long-term consequences beyond the drought event. In this study, we propose hay markets as a short-term buffer for drought-induced feed shortages and income shocks. We compare potential trading networks differing in trading radius and trading partners in terms of effectiveness, efficiency and possible side effects using a stylised network model. For farm units aggregated at the German county level, we simulate cost-minimal trading schedules and derive remaining feed shortages and income shocks. Results show that forage trading can reduce shocks by around two-third during nationwide droughts and fully mitigate localised shocks. Effective mitigation requires either a broad trading radius or sufficient trading partners. However, poorly connected nationwide networks can lead to inefficient transport, while segmentation at state level may lock in shortages and reduce both effectiveness and efficiency. We also observe unintended side effects: trading may shift income shocks to unaffected farm units and increase overall transport distances. Overall, we show that hay markets could enhance dairy farmers’ drought resistance, but must be designed carefully. Policy makers, farmer associations, and agricultural chambers can support this by providing a well-designed market infrastructure.