PNW Hay Exporters Hope for Better Season03/23/2018
Exporters say inventories of 2017 alfalfa and Timothy hay should sell out this spring but that export pricing still appears to be tricky.
“Right now we have a lot of competition for market share coming out of Australia and Canada where they have weaker currencies and are offering product at cheaper prices than we can for Timothy and Sudan grass,” said Jeff Calaway, president of Calaway Trading Inc. in Ellensburg.
Exporters, many of whom are in Ellensburg, have never fully recovered the markets that were reduced or lost from the 2014 and 2015 work slowdown at West Coast container ports, he said.
Exporting alfalfa is tough because rain and smoke damaged a lot of alfalfa last season, knocking it out of export quality and creating a Pacific Northwest shortage, Calaway said.
Domestic dairies are willing to pay more than export markets for the high-test alfalfa, he said.
And there’s the challenge of Saudi Arabia buying a lot of premium new season alfalfa in the Pacific Southwest at prices higher than Japanese, Korean and Chinese buyers are willing to pay, Calaway said.
Saudi Arabia’s Almarai Co., the largest dairy in the Gulf region, has bought hay fields in California and Arizona in recent years through its subsidiary Fondomonte California, to source its own hay. Water scarcity has caused the Saudi government to restrict domestic crops.
Almarai took 400,000 tons of hay out of the Southwest last year, continues to go after top quality and is willing to pay top price to get it, Calaway said.
More U.S. exporters should be able to compete in Saudi Arabia as it continues to restrict water for production, said Mark T. Anderson, president of Anderson Hay & Grain Co. Inc., another large Ellensburg exporter.
“China and the Middle East continue to be good emerging markets for U.S. hay products but competition from other countries is heavy, especially in the Middle East,” Anderson said, adding that his company has good quality, consistent supply and good brand recognition in both regions.
Pricing in China has improved a little each month but is below new crop starting prices in the Southwest, he said. It should balance out as old crop inventories sell out and exporters are less inclined “to dump product into China to keep hay presses busy,” he said.
Chinese demand has been growing at discounted prices but dramatic improvement is unlikely because of competition from other export countries and Chinese dairies not doing well, Calaway said.
Andy Schmidt, vice president and co-owner of Ward Rugh Inc. in Ellensburg said it’s hard to find the right price at the farm for what China wants to pay.
Timothy prices will have to soften to gain overseas market share this season, Schmidt said.
Last season, exporters got aggressive buying premium and supreme horse Timothy at up to $340 to $350 per ton, which was too high to compete with Australian oat hay and Southwest Sudan grass on the dairy side, he said.
Ward Rugh’s primary market is Timothy going to Japan and South Korea.
“We expect old crop inventories of alfalfa to clean up well up and down the West Coast,” Anderson said. “We also see lower acreage planted so we expect supply and demand to match up better.”
Source: Dan Wheat, Capital Press