West Coast hay exports, the vast majority of U.S. hay exports, are likely to set new volume and dollar records in 2017, analysts say.
ELLENSBURG, Wash. — While hay exporters in Ellensburg say it’s still a long, tough road back from market losses caused by the port slowdown of 2014 and 2015, University of California analysts say West Coast hay exports may set new records exceeding 5 million metric tons and $1.4 billion in value in 2017.
China and relative newcomer Saudi Arabia are driving the increase, according to an October Alfalfa and Forage News report by UC-Davis Cooperative Extension.
Japan remains the largest importer of U.S. hay at 1.57 million metric tons in 2016 but growing only 2.2 percent from 2015 while China/Hong Kong was close on its heels at 1.4 million metric tons up 24.4 percent from 2015, according to the report. South Korea was third at 935,000 metric tons up 3.1 percent and United Arab Emirates was fourth at 399,000 metric tons up 21.4 percent. Saudi Arabia was fifth at 264,000 metric tons up 257.3 percent.
Mark T. Anderson, president of Anderson Hay & Grain Co., a large West Coast exporter in Ellensburg, says tonnage to China is great.
“But given current market dynamics there is no profit in sales to China by growers or processors. Hopefully, this will change as alfalfa supplies tighten up this winter and into new crop next year,” Anderson said.
There is demand from Saudi Arabia, but most of the buying is from one large dairy there with its own operations in Arizona, he said.
“Time will tell on future tons, what comes from the U.S. and how channels get developed,” he said. “We see opportunities to grow hay exports, but markets are competitive and other countries are working hard to ramp up production.”
Daniel Putnam, UC-Davis Extension alfalfa and forage specialist and one of the report’s three authors, said volume of exports has grown 56 percent in the first six months of each year since 2014 and export values 47 percent. He noted that’s coming up from a significant slump in 2014 due to work slowdowns at ports.
“The entire alfalfa industry has been slowly coming back from low prices over the past few years as dairy prices increase and inventory and acreage is down,” Putnam said.
Don Schilling, president of Wesco International, Ellensburg, said competition will be keen for the Chinese and Middle East markets and that those countries shop around more than Japan did when it entered the market years ago.
“As long as we continue to be the most reliable and safe supplier, we will dominate the market,” Schilling said. “But when our prices are too high they will look elsewhere more than they already are and when our roads or ports are congested, we lose.”
Saudi demand is increasing because of a three-year program, begun in 2016, to conserve water, according to UC-Davis reports. It has resulted in a reduction of domestic alfalfa, wheat, corn and several other commodities important for dairy and livestock production.
The UAE and Saudi Arabia are regional milk producers and water restrictions in the UAE several years ago increased U.S. hay exports to the UAE from minuscule to 399,000 metric tons in 2016, the reports say.
While importing 264,000 metric tons of U.S. hay in 2016, Saudi Arabia imported 100,000 from Spain and less than 25,000 from Argentina. European, African, South American, Canadian and Australian suppliers are likely to compete for the Middle East hay market and while the U.S. has a disadvantage of distance it has an advantage of quality, the reports say.
The Middle East market will be a driver in continuing to increase U.S. hay exports which have risen in recent years to 15 percent of alfalfa production and 50 percent of grass hay production in the seven western-most states, the reports conclude.