Rising domestic prices haven't kept foreign buyers from backing away from U.S. hay products, say representatives of several major West Coast exporting firms.
"We haven't seen a lot of (price) resistance yet," says Rollie Bernth, president of Ward Rugh, Inc., in Ellensburg, WA. His firm markets timothy, alfalfa and other hay to livestock producers and horse owners in Japan. "Our customers seem to have accepted the fact that U.S. alfalfa is going to be in short supply. As long as prices don't get too carried away, like they did in 2008, they'll likely continue to buy."
Sales activity after first cutting in the Columbia Basin, where most of Ward Rugh's suppliers are located, underpins Bernth's optimism. "Somewhere around 70-80% of that first cutting got rained on. We have one or two customers in Japan who absolutely won't buy any hay that's even been sprinkled on. But there are many other customers who saw that a lot of the hay still tested fairly well. They realized the value of that hay and placed orders even though the price at the farm level was high."
Bernth's company has just started quoting prices for second-crop hay. "The price is a little higher than it was for first crop, but it's still a little early to tell just how buyers might react," he says. "So far, though, it looks like demand will still be strong."
Sales to buyers in Pacific Rim countries – most notably Japan, South Korea and China – during the first seven months of 2011 have been running "steady to a bit stronger" than they were a year ago. So says Adam Lyerly, of El Toro Export, LLC, in El Centro, CA. "Overall, sales have been exceptional. Even at these high values (hay prices), the demand is definitely there."
Several factors go a long way in explaining the strong sales to the region, Lyerly says. They include competitive ocean freight rates for products moving to the Pacific Rim and a continued strong demand for high-quality U.S. alfalfa by China's expanding and modernizing dairy sector.
A favorable currency exchange rate, though, has been the key. In recent months, the U.S. dollar has been trading at a near all-time low compared to the Japanese yen and has also been relatively weak compared to Korea's currency, the won. "These kinds of favorable exchange rates represent a huge cost saving for buyers of U.S. hay and make our exports that much more attractive," says Lyerly. "The weaker dollar may not be helping the rest of our economy, but it's definitely been a positive for our particular sector."
Sales to the United Arab Emirates (U.A.E.), a rapidly growing market for U.S. hay products in recent years, have fallen off "slightly" this year, Lyerly reports. But that likely has more to do with transportation than with domestic U.S. hay prices. "Buyers there have the opportunity to purchase hay from Spain, Egypt and Pakistan. All of those countries can offer fairly attractive freight rates."
To contact Bernth, call 509-925-2827 or email rollie@wardrugh.com. Lyerly can be reached at 760-455-3861 or alyerly@eltoroexport.com.