A dragging dairy economy worldwide continues to put downward pressure on alfalfa hay exports out of the Pacific Northwest, says Mark Anderson, president of Anderson Hay & Grain Co., Inc., an exporting firm in Ellensburg, WA. He reports the current price for premium export hay is around $130/ton, significantly below last summer’s high-watermark of $250/ton. “It’s best described as a soft market right now,” says Anderson. There’s a lot of concern (among hay growers and exporters alike) about how 2009 is shaping up.”
While slumping milk prices have been the major factor underpinning the domestic hay price collapse, the “tough” dairy economy is not just a U.S. issue, says Anderson. “Specifics vary from country to country. But high input costs are the one constant. They have created an unprofitable marketing situation for dairy producers all over the world.”
A variety of other factors are also making it more difficult for U.S. hay exporters to move product overseas. Fluctuations in currency values have caused buyers in some Pacific Rim countries to back off on hay purchases. “In particular, the Korean won has had a very tough time,” says Anderson.
The worldwide economic slump has also crimped imports of all kinds of products coming into U.S. ports. In turn, that’s created a shortage in the number of shipping containers available for moving hay abroad. “That really complicates the economics related to transportation,” says Anderson.
On the flip side, there are some potential bright spots. Fuel prices have come down considerably from last year’s record highs. That will help U.S. exporters hold a tighter rein to overall transportation expenses. Likewise, the yen in Japan, traditionally the biggest importer of hay out of the Pacific Northwest, has remained strong. Exports to the Middle East, particularly the United Arab Emirates (UAE), could also increase during the year ahead as countries in that region continue to deal with water-shortage issues.
Even with those positives, Anderson fears U.S. exports are in for tough sledding in 2009. “They’ve already started harvesting in southern California and the market at this point looks pretty soft. My major concern heading into last winter was that we would find ourselves managing a major overcorrection in the market this spring. I think that’s where we’re at now.”
A major contributing factor, he adds, is that many overseas buyers may have lost confidence in the U.S. pricing structure for hay. Last year’s climb in alfalfa prices was mostly a result of early season speculation that U.S. supplies would be extremely tight due to a significant drop in acreage planted to hay. “Everybody was looking for a huge shortage of alfalfa. But at the end of the day, the shortage was never recognized. When the prices started escalating, hay was coming out of every corner and demand started to fall.”
Net result, Anderson says, is that foreign buyers are likely to be more conservative when making purchasing decisions this year. “People got pushed over the edge with last year’s pricing. And a lot of money was lost in the hay business. Now people have lost confidence. They feel like they need to be more cautious when buying hay products.”
For more information about Anderson Hay & Grain Co., go to the company’s Web site at www.anderson-hay.com. To contact Anderson, email email@example.com or call 509-925-9818.