Firms exporting U.S. forage products are on a roll. Sales spiked sharply in 2010, and most knowledgeable observers think things could be even better in the year ahead.

“It’s a great time to be an exporter of U.S. forage crops,” says Adam Lyerly of El Toro Export, LLC, in El Centro, CA. “Not only are some traditional overseas markets coming back, several new and emerging markets appear to hold promise as well. We’re looking forward to a very positive 2011.”

Rapidly growing sales of U.S. alfalfa into China underpin much of the optimism. According to a recent market development report from USDA’s Foreign Agricultural Service (FAS), China imported nearly 95,000 metric tons of U.S. alfalfa during the first six months of 2010. In all of 2009, Chinese imports of U.S. alfalfa totaled just 76,000 tons.

For the year, the FAS report forecasts that Chinese imports of U.S. alfalfa could approach 180,000 metric tons.

“It’s pretty incredible when you think about it,” says John Szczepanski, director of the National Hay Association’s (NHA) Export Processors Council. “Just a few years ago, we were basically sending nothing to China.”

A growing appreciation of the nutritional value of U.S. alfalfa compared to domestically produced, lower-quality “sheep hay” on the part of Chinese dairy producers has been the key to improving exports into China.

“Chinese dairy producers are seeing what higher-testing U.S. alfalfa does to increase milk volume,” says Lyerly. “As a result, they’re willing to pay a little more for it.”

While alfalfa is currently the only U.S. hay product allowed into China, Lyerly says that could change in the near future.

“There are some positive signs that bermudagrass and kleingrass hay will work well in the Chinese market,” he says. “Nothing’s been officially approved yet. But all of the protocols are in place. It’s just a matter of waiting while trade negotiations between the two countries play out.”

There were also positive developments in other parts of the Far East during 2010. On the emerging markets front, U.S. alfalfa exporting firms managed to gain a small foothold in Vietnam.

“It’s certainly nothing on the scale of what we’re seeing in China,” says Lyerly. “But it’s always nice to see a new market developing.”

Even more encouraging for many U.S. firms was the way in which U.S. sales to Japan and South Korea rebounded last year after falling off sharply in 2008 and 2009. The two countries account for roughly 70% of all U.S. hay exports.

“Sales to Japan haven’t been this good for a long time, and I don’t see any reason it can’t keep going,” says Rollie Bernth, president of Ward Rugh, Inc., an Ellensburg, WA, hay exporting firm that has been selling alfalfa, timothy and sudangrass to Japan since the mid-1970s. “If it stays like this, we could run out of some products before new crop.”

The Middle East was the other major global bright spot for exports in 2010. Many governments in the region have determined that it’s more economically feasible to import hay and other forage products for their growing livestock industries than to use scarce water supplies for irrigation.

Lyerly acknowledges that sales to the United Arab Emirates (UAE) dipped slightly in early 2010 compared to year-earlier levels. But he says that’s most likely the result of overbuying in 2009 on the part of UAE import firms.

“As the year went along, though, most of the oversupply seemed to have worked its way through. From all the reports we’ve been getting, things should be returning to normal next season.”

NHA’s Szczepanski pegs Saudi Arabia as the region’s “market to watch” over the next several years.

“In general, it’s still a new market,” he says. “Buyers and sellers are still feeling each other out, trying to determine who is a good trading partner and how business can be conducted. The progress has been gradual. The good news is that things are happening.”

As encouraging as the news about exports is, Szczepanski cautions that hay markets, especially in the Middle East, are extremely price sensitive.

“Our growth over the past couple years has been helped with some lower-than-average pricing,” he says, adding that the UAE has been developing other supply sources – Pakistan, Spain and Egypt – to spread investment risk. “My guess is that Saudi Arabia will do the same. If the U.S. can’t compete on price with these other supply sources, our growth in the region will certainly level off.”

Mark Anderson, president of Anderson Hay & Grain, another Ellensburg, WA, hay exporting company, expresses a similar sentiment, adding that the Chinese market is equally price sensitive. He points out that a sharp run-up in domestic hay prices in the middle of the last decade, coupled with a worldwide economic downturn, led to a major slump in U.S. overseas hay shipments.

“We learned in 2008 what happens when hay gets too high-priced,” he says. “Demand can come off quickly and sharply, and it can take some time for things to rebound.