“The U.S. dollar is having a huge impact on hay exports,” said Scot Courtright at the Western Alfalfa & Forage Symposium earlier this month in Sparks, Nev. He argued the environment of the U.S. exchange rate is the biggest driver in low hay exports this year, along with weaker domestic import volumes and variable demand from individual markets.

Courtright is the owner of Courtright Enterprises, an export company based in the Columbia Basin, where he oversees logistic operations and international sales. During his presentation on hay export dynamics, he noted the spike in the U.S. exchange rate that began in March 2022 has had the greatest impact on hay exports to China and Japan — the two largest markets for U.S. hay.

“The U.S. was exporting about 4.5 million metric tons (MT) of hay about 18 months ago, and that number is down to just about 3 million MT,” Courtright stated. “The market is missing 1 million to 1.5 million MT of demand, which is fairly devastating for the export group.”

Courtright suggested Japan was the first market to react to the higher exchange rate last year. In the past six months, the country’s purchasing power has declined by about 30%, and it only imported about 60% of its normal hay volume through the summer. Although some of this drag may be attributed to higher hay prices due to drought, Courtright said the only way to resolve the downturn is to ease the exchange rate of the U.S. dollar and Japanese yen.

“For volume to begin to recover in Japan, we need the exchange rate to change,” he asserted. “Hay prices cannot get low enough to overcome this exchange rate environment.”

Another factor impacting hay exports to all countries is a lower import volume of all goods in the U.S., which hinders shipping container availability for exports. Courtright explained that the peak import season tends to align with the peak export season from August to October, but this year’s import volume — and the number of available shipping containers — was down by 40%.

Import rates have also taken a dive, pulling export rates in the same direction. Courtright said it currently costs his company about $10 to $12 per ton to ship hay to an Asian port, whereas export rates were nearly four to five times as expensive in 2022.

“That is a benefit for us shippers — it’s taking less money to ship — but it’s an overall indicator of how much hay is actually exporting,” he reasoned.

Less demand in Japan

In addition to exchange rate issues, hay exports to Japan could be lower due to a rise in their domestic hay and silage production. Courtright explained how a hike in feed costs last year led the Japanese government to subsidize transportation of domestic feed from the northern part of the country to southern regions where most dairies are located.

“Our customers figured about 10% of the volume they lost from exporting traditionally has been from an increase in domestic supply (in Japan),” Courtright said. “We don’t know if as prices normalize the government will keep this program in place, but it has taken some of the market.”

Despite this, Courtright was hopeful for future hay exports to Japan. He noted the country has been the most stable U.S. hay export market for several years, and he speculated that falling feed costs and recovering milk prices are putting Japanese dairymen back in a profitable position that will generate a greater demand for U.S. hay.

Chinese exports plunged

Alfalfa hay exports to China have been reduced to a much greater extent. Courtright said as the largest market for alfalfa hay, China’s demand reached a total of 1.6 million MT in 2022. The country did not start to slow imports as quickly as Japan when the U.S. exchange rate went up; however, it is currently only importing a fraction of what it did before.

Courtright noted U.S. alfalfa hay exports to China hit their lowest point in August when the country imported about 30% of the volume of hay it did the previous year. This number has improved in more recent months, but it is nowhere near normal levels. In addition to the strain created by the U.S. exchange rate, Courtright credited the drop in alfalfa hay exports to China to the country’s weakened economy and low milk prices.

“China is massively over producing milk, which has their milk prices very low,” Courtright said. “Even as hay prices are dropping, they don’t need to produce as much product, so they are feeding less.”

Other markets on the rise

South Korea represents the largest export market for U.S. grass straw, which has not had as much of an uptick in price as alfalfa and timothy hay. Courtright said South Korea continued to import a significant amount of U.S. grass straw through 2022 and only saw a slight decline in volume in 2023.

He mentioned the country is set to terminate its quota system for imports, which may open doors for more trade moving forward. And although the dairy herd in South Korea is downsizing to a degree, it is not shrinking as quickly as other countries.

Hay exports to Saudi Arabia have seen the biggest growth in the past five years compared to other export markets. That said, Courtright described Saudi Arabia as a captive market since the large Middle Eastern dairy company, Almarai, owns Fondomonte, which is a company based in Arizona and California that supplies most of its hay.

Courtright added that Saudi Arabia has chosen to inhibit irrigation of crops for nonhuman consumption, as have many other Middle Eastern countries like the United Arab Emirates. He said there is potential to expand upon exports to markets that implement similar food security programs in the future since they will rely solely on imported hay for livestock feed.

India and Vietnam also show potential as growing U.S. hay export markets, and Courtright anticipates Qatar could become an important player as well. Overall, he expects hay exports to continue to fall short for a while but is hopeful that a more conservative exchange rate will eventually improve international trade.

“In the long term, the forage export situation does look positive, but we are going to struggle for a while as the U.S. dollar is strong,” Courtright concluded.