By just about every measure, 2009 was a tough year for U.S. hay exporting firms. As the new year gets under way, though, many leading exporters believe a significant rebound in sales could be just around the corner.
Among the reasons for optimism:
- The worldwide economy is recovering
The global financial crisis of late 2008 led to a steep decline in currency values in Pacific Rim countries that have traditionally been major buyers of U.S. hay products — Japan, Korea and Taiwan. That severely crimped the purchasing power of livestock producers looking to build rations around high-quality feed imports from the U.S. and led to a huge hay glut throughout Asia.
As of late 2009, a weakening U.S. dollar and a recovering dairy sector, especially in Japan, had Pacific Rim buyers working off inventories and placing new orders. While a shortage of ocean-going shipping containers for moving U.S. hay to Pacific Rim destinations and uncertainty over the direction of fuel prices remain concerns, most industry watchers expect hay exports to continue increasing as overall trade picks up.
“The situation isn't back to normal by any means,” says Adam Lyerly, a sales representative for El Toro Export, LLC, El Centro, CA. “But it is improving and on its way back to normal.”
- Water remains scarce in the Middle East
In response to growing demand for dairy products, dairy production has been on a sharp upward tick in countries like the United Arab Emirates (UAE), Saudi Arabia, Egypt and Jordan over the past several years. With water a scarce resource, many governments in the region have restricted irrigation for low-value forage crops.
Net result: Dairies in those countries are looking beyond their borders to secure the high-quality forages needed to fuel expanding dairy herds. Hard-and-fast numbers are hard to obtain, but by some estimates, the UAE purchased around 300,000 tons of hay from U.S. exporters in 2009. Many industry watchers expect that amount to increase significantly this year.
“It's a big, budding market,” says Bob Eckenberg, president of Eckenberg Farms, a Mattawa, WA, company that ships alfalfa cubes and compressed bales worldwide. “Without a doubt, increasing our sales to that part of the world would be very good for the U.S.”
Eckenberg adds that the U.S. is well-positioned to compete with countries closer to the Middle East.
“Europe can only supply so much of what those countries need,” he says. “We have the availability to get a lot of product moving and get it delivered.”
- China is becoming a player
Chinese trade delegations made several trips to the U.S. in 2009 to discuss prospects for opening their market to grass hay and straw to support the country's growing livestock sector. Alfalfa was approved the previous year. Several trial shipments were arranged. While a variety of political and regulatory issues still need to be addressed, the prospect of supplying more forage to the People's Republic is welcome news for U.S. growers.
“These kinds of markets don't open up overnight, and we're still on a pretty steep learning curve,” says Lyerly. “We're still working up guidelines for grading standards, trading terms and so on. But China represents a potentially huge market. There hasn't been much excitement in the (U.S.) hay industry in recent years. This promises to be out-and-out fun.”
- Domestic hay prices have stabilized
If there's any bright spot to the dramatic tumble U.S. hay prices took off the record levels of mid-2008, it's that the current price level stands to make U.S. hay more competitive with hay being pushed by Australia, Canada and Europe.
“Price is always a factor,” says Lyerly. “And right now in the U.S. we're at historically low values for most kinds of hay. Combine that with the reputation U.S. suppliers have built for delivering value and quality feed, and we're in very good shape to compete.”