Demand for U.S. alfalfa hay in China is likely to remain strong for some time to come. So says a representative of a company hired to help that country’s dairy industry become efficient.
“There is definitely a need for high-quality alfalfa and other feeds in China. Chinese producers are very happy with the quality of U.S. hay,” says James Su Hao (pictured below), co-founder and general manager of East Rock Ltd. The company comprises six dairy-related businesses in the U.S. and Canada that want a part in developing Chinese dairies.
The dairy industry in China continues to grow and modernize at a frenetic pace to keep up with its urban consumers’ exploding demand for milk and other dairy products, says Hao, a native of Beijing. Total milk production for the country was just more than 38 million tons in 2011. By 2015, Hao expects production could swell to more than 56 million tons if the country’s milk producers meet goals for per-capita consumption established by the Dairy Association of China.
Larger dairy farms will be necessary to sustain that kind of growth. In 2007, 1,000+ head herds made up just 7% of Chinese dairies. By 2010, that percentage had grown to 11%.
“And we now have several dairies with more than 20,000 milk cows, something that was unheard of just a few years ago. All of these larger dairies recognize that they need good-quality forages like alfalfa and corn silage for their rations.”
At current production levels, Chinese dairies utilize 500,000 tons of alfalfa annually, only about half of which are produced within the country. The rest are imported from other countries, with the U.S. having a dominant market share. Alfalfa imports in 2011 totaled 276,000 tons, up more than 26% from the year-earlier number. Total dollar value of the imported alfalfa was just under $100 million.
“It’s unlikely that we’ll see the amount of land devoted to alfalfa production increase anytime soon,” says Hao. “We just don’t have enough of the soil type that’s needed. Also, we don’t have the expertise to grow as much alfalfa as is needed. Developing that will take some time.”
Yet there’s likely a limit to how high a price Chinese dairy producers will pay for U.S. alfalfa, Hao warns. Last year, the average price of all alfalfa imported into the country was $361/ton, an increase of 33% from that of the year before.
“We did see imports back off somewhat mid-year because of the higher prices. By the end of the year, the volume appeared to be bouncing back. But if the price gets too high and stays there, it could slow overall growth.”
U.S. exporters, as they work to continue building Chinese markets for alfalfa, face competition from other countries.
Alberta-based Green Prairie International, Inc., announced earlier this year that it had delivered the first-ever shipment of Canadian alfalfa into China. Along with that shipment of 20 containers, valued at $600,000 (Canadian), Green Prairie has commitments to deliver another 40 containers of alfalfa. The Canadian government is also negotiating new market access for timothy hay products in China. Australia and several European countries are working to develop Chinese markets for their hay products as well.
Stringent Chinese import regulations pose another challenge for U.S. hay exporters, says Bill Plourd, president of El Toro Export, LLC, an El Centro, CA, firm that exports alfalfa and other commodities worldwide.
“(Chinese) requirements and protocols for bringing in hay tend to be cumbersome, a little overly onerous. But it’s not just hay. That’s true of any goods being exported to China. You have to expect some bumps along the way.” Even so, Plourd expects U.S. hay exports to grow. “It remains a very good target market for the U.S. hay industry.”