Growing demand for high-quality feedstuffs by China’s burgeoning dairy industry has the potential to translate into a major boom for U.S. alfalfa exporting firms.

Chinese imports of U.S. alfalfa, currently the only hay product permitted to enter China from the U.S., soared from less than 2,000 metric tons in 2007 to 76,000 metric tons in 2009, according to a recent market development report from USDA’s Foreign Agricultural Service (FAS). Between 2008 and 2009, the dollar value of those export sales quadrupled, going from $4.4 million to $18.4 million.

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

What’s more, the recent sales spurt may be just the tip of the iceberg. In the first six months of 2010, China had already imported 95,000 metric tons of alfalfa, nearly all of it from the U.S., the FAS report notes. If Chinese imports continued at that pace, U.S. alfalfa exports for the entire year would top out at around 180,000 tons. That would make China an export market comparable in size to South Korea, traditionally one of the biggest importers of U.S. hay.

The growing reputation of the U.S. as a reliable supplier of high-quality forages among Chinese dairy farmers has been a key factor behind the sales increases. There is a domestic alfalfa production industry in northern China. But while that hay is often favorably priced compared to alfalfa coming in from the U.S., the quality can be variable.

“There’s a greater understanding on the part of Chinese dairy producers about the value that good forages play in their rations,” says Szczepanski. “Now we’re starting to see a kind of ‘me-too’ factor at work. As milk production improves on Chinese dairies that are feeding high-quality U.S. hay, neighboring dairies that are buying lower-quality, domestically produced hay see the benefits of U.S. alfalfa. They want in on the action.”

While there is potential for even more growth in sales of U.S. alfalfa to China, there are also several potential hurdles, according to FAS. The Chinese dairy industry suffered a major setback in 2008 when milk products were found to be contaminated with melamine. At the height of the ensuing scandal, dairy product consumption in China dropped off by 15%. “While the (Chinese) dairy industry is much more vigilant than in the past,” note FAS report authors, “new food safety scandals could further erode consumer confidence in the safety of Chinese dairy products. Should consumption decline again, raw milk prices would drop, and some dairies would likely be unwilling to continue importing alfalfa.”

They add that developments in the U.S. dairy industry will also play a role in the pace at which the Chinese import U.S. hay. “Price sensitivity is the largest threat to long-term import growth. It is possible that a strong recovery in the U.S. dairy market, with a consequent rise in (forage) prices, could price-out many Chinese dairy farmers.”