Global Hay Demand, Competition Grow Strong

Global Hay Demand, Competition Grow Strong

How much hay will be exported to calcium- and protein-hungry regions like China and the Middle East may depend in part on competition from California dairies. So says Greg DeWitt, marketing manager for ACX Pacific Northwest, Inc., a California-based hay exporter.

ACX currently buys hay from seven key Western states – Washington, Oregon, California, Arizona, Nevada, Utah and Idaho. But demand for high-quality hay among domestic customers is on the rise, partly because of continued drought in the West that has cut into hay stocks and pushed prices upward.

“It’s all going to come down to the domestic markets and the availability of hay,” he says of his company’s ability to sell more hay overseas in 2014.

Even so, only 3-4% of all U.S. hay production is exported, he adds. “A significant portion of the alfalfa we supply overseas is summer hay that traditionally has not had the strongest demand domestically.

USDA’s May ag export projection, totaling $149.5 billion, is an increase of $6.9 billion from its February prediction. Hidden in the numbers is the rising demand for alfalfa hay, which alone accounted for about $586 million in exports last year.

“Export forage dynamics have changed a lot in a relatively short period of time,” says John Szczepanski, director of the U.S. Forage Export Council, a committee of the National Hay Association.

“Just a few years ago, Japan and Korea accounted for the lion’s share of U.S. forage exports. Since 2007, those traditional markets have remained pretty much the same, with all the new growth coming from China and the Middle East.” (See graphic.)

China, with an estimated 15 million dairy cows to feed, is now the No. 1 foreign buyer of U.S. alfalfa, due in part to its growing appetite for dairy products and animal protein. More than 800,000 tons of alfalfa hay were shipped from the U.S. to China in 2013, compared to none in 2006 and 460,244 tons in 2012, according to USDA’s Foreign Agricultural Service (FAS).

Just three years ago, Chinese hay purchases were about 2% of ACX’s total revenue, adds DeWitt. Last year, China accounted for 21% of the company’s hay sales.

Although 94% of the hay that China imports comes from the U.S., according to FAS, other countries are also starting to compete for the business. China recently signed significant agreements to import forage from Canada and Spain.

“The U.S. isn’t the only show in town,” Szczepanski warns. “Exporters need to continue to focus on safety and quality.”

But rising demand for hay is more than just a Chinese phenomenon. The United Arab Emirates, South Korea, Taiwan, Malaysia and Indonesia all have increased their hay imports over the past year as well.

ACX is based in Bakersfield, CA, with storage and hay-processing facilities in Stockton and WIlmington, CA; Ellensburg, WA; and Goldsboro, NC.

Contact DeWitt at gregdewitt and Szczepanski at john.

Forage Export Market Grows | MARKETING content from Hay & Forage Grower

The forage export market is getting larger, “and that’s good news for growers,” said John Szczepanski, director of the U.S. Forage Export Council (USFEC), a subcommittee of the National Hay Association (NHA).

But USFEC, made up of 29 Western U.S. forage export companies, is working to overcome some potential customers’ misperceptions of, and lack of information about, U.S. hay. Szczepanski updated NHA members on his progress at their mid-September annual meeting in Salem, OR.

“Total U.S. (hay) exports are about $1.3 billion,” he said, with Japan’s purchases at half that amount. “It has been a significant market and, historically, the lead market. But, increasingly, we see growth in China and the UAE (United Arab Emirates), and I would say that represents a quarter of our market.” South Korea accounts for another quarter of U.S. hay exports.

China’s appetite for dairy products has increased in recent years. But its dairies are located near heavily populated areas closer to the coast, while the country’s grassland regions are farther inland.

“It is cheaper for China to import quality product” than transport its forage to the coast on an insufficient road system, Szczepanski said. The country annually spends $200-$250 million on U.S. hay purchases. “The U.S. still provides quality product, and it’s important that our industry keep up that quality and keep up the safety standard.

“But I met with Chinese officials who said, ‘Right now we’re buying product from you; in the future, we will sell to you,” he cautioned the group. According to some reports, the Chinese may accept Roundup Ready alfalfa imports as soon as next fall or early 2015, he added.

Middle Eastern countries look to buy more U.S. hay in part because they can no longer afford to use their few water resources to raise the crop themselves. “They really need to be buying from outside, and that could be the U.S. The U.S. has developed a good reputation in most parts of the Middle East, but that market could be expected to grow.”

In Saudi Arabia, one newspaper report suggested an increase in alfalfa imports of 2.6 million tons in the next couple of years. Szczepanski has heard numbers closer to 3 million tons.

“They want 3 million tons of alfalfa. The U.S. exports 3 million tons of everything, so, obviously, Saudi Arabia and other countries in the Middle East are developing contacts, not only in North America, but in North Africa and Europe. We’re going to be playing in an increasingly global environment.”

Szczepanski strives to identify governmental, academic and trade association contacts to help USFEC’s export companies, from three Western hay-growing regions, gain access to foreign markets. A third of those companies are located in northern region – in Washington state, Oregon and Idaho. Another third, in Oregon’s Williamette Valley, make up the central region. California export firms make up the southern region.

USFEC doesn’t promote individual companies; it presents them as a united export entity, he said. Szczepanski works with countries to set up protocols and procedures and clear export obstacles so member-companies can effectively export product.

At a Japan trade show last October, his staff surveyed hay importers, asking if they felt U.S. forage was “safe or very safe” and whether they were willing to pay for a safe product. The majority said that they did, but only 68% intended to buy U.S. forage in the next 12 months.

Part of the problem may be that information – such as how U.S. growers produce good-quality hay – gets lost in translation from buyers to end users. It could give end users “skewed” views of U.S. forage, he said.

Rather than advertising, USFEC has worked with the editors of Japanese dairy and beef magazines, providing them with article ideas to educate end users on U.S. hay products.

“In 2012, people came to us and said, ‘We noticed the quality here is not as good as it was before. We understand the United States is shipping more product to China and the Middle East.’

“The implication was that we were sending better product to those other markets.” They hadn’t heard of the challenging weather conditions that U.S. growers faced last year, Szczepanski added.

Japanese importers are aware when a half-inch of rain falls in hay-growing regions of the U.S. He hopes that magazine articles will also help keep their end users informed and repair some of the mistrust of American-grown products.

As an example, he told of a farmer who complained that the dry timothy imported from another country was “a lot of work.” But, he added, he didn’t trust American hay because “it looks too good. It’s obvious you’re putting chemicals all over it and I’m not going to buy it.”

Szczepanski explained that the hay may have been produced under irrigation. But the assumption was, “if it looks good, there’s something wrong with it. We’ve got that reputation built into the Japanese mindset that U.S. product is overly chemically treated. We need to work through that.”

China’s Grain Imports Seen Surging as Global Crop Prices Decline – Bloomberg

Grain imports by China, the biggest consumer, are on course to surpass last year as a slump in global prices encourages purchases even as farmers across the country prepare to increase harvests for a 10th straight year.

Inbound shipments of wheat, corn and rice are projected to rise, while domestic corn and rice output expands and wheat remains in line with last year or falls, according to estimates from state and private forecasters in China and the U.S.

Chinese purchases benefit growers of corn and wheat from the U.S. to Argentina and Ukraine, while Thailand supplies premium rice and coarser varieties of the Asian staple are shipped from Vietnam and Pakistan. Wheat and corn futures slumped more than 20 percent in Chicago the last 12 months while Thai white rice, the regional benchmark, fell 14 percent.

“Imported grains are cheap and some local crops like wheat, which has had issues with quality, are struggling to compete,” Li Qiang, chairman of Shanghai JC Intelligence Co., said by phone today during a crop tour of central Henan province. “It’s conceivable we’ll get a record in combined imports of all grains this year.”

China will buy 4 million metric tons of wheat in the year that began June 1, the most in nine years, while corn imports will rise 67 percent to 5 million tons, the U.S. Department of Agriculture said July 3. Corn purchases in the 12 months starting Oct. 1 may rise to a record 7 million tons, according to a Bloomberg survey last month.

Rising labor costs and policies to boost local prices to aid farming incomes have made Chinese crops less competitive, said Li.

Wheat Output

Wheat output will increase for a 10th year, according to a June 28 report by the Ministry of Agriculture in Beijing. The harvest may match last year’s 120.6 million tons, the state-owned China National Grain & Oils Information Center said on June 13, while private researchers including Ma Wenfeng at Beijing Orient Agribusiness Consultant Ltd. projected declines.

Wheat imported under government-issued low-tariff quotas costs about 2,100 yuan ($343) a ton, compared with a domestic price of about 2,400 yuan, according to Shanghai JC.

Wheat for September delivery in Chicago closed at $6.65 a bushel on July 3 after the USDA reported China bought 360,000 tons of the grain from America. Corn futures ended at $5.0275 a bushel and Thai white rice closed at $524 a ton.

Profits from importing corn under official quotas are about 400 yuan a ton, researcher said July 3. Private companies bought three cargoes of new-crop U.S. corn in the last two weeks, bringing shipments for the year beginning Oct. 1 to 4.5 million tons, it said.

Corn Shipments

Argentina, the world’s second-biggest corn exporter, shipped 60,000 tons to China last month, Agriculture Minister Norberto Yauhar said June 12. That would be the first after the two nations signed a quarantine agreement last year.

Rice imports may exceed last year’s record, said Ma at Beijing Orient. Rice purchased from Vietnam, including import costs, is 25 percent cheaper than domestic supplies, he said.

Global grain output, excluding, rice may climb to 1.92 billion tons from an estimated 1.78 billion tons in 2012-2013, the International Grains Council said July 1. Rice production is seen rising to 476 million tons from 470 million tons, the council forecast.

To contact Bloomberg News staff for this story: William Bi in Beijing at wbi

To contact the editor responsible for this story: Brett Miller at bmiller30


Soybeans Set for Biggest Weekly Gain Since January as China Buys

Soybeans Set for Biggest Weekly Gain Since January as China Buys

Soybeans rose in Chicago, set for the biggest weekly gain since January, on signs of sustained Chinese demand and on speculation a pickup in U.S. corn planting may leave fewer acres for sowing the oilseed.

China, the biggest soybean importer, purchased 79 percent of 346,634 metric tons sold by U.S. exporters in the week ended May 9 for delivery in the year beginning Sept. 1, the Department of Agriculture reported yesterday. That takes total U.S. sales for the next marketing year to 8.86 million tons before most farmers even planted their crops, USDA data show.

“Sustained U.S. soybean export sales to China supported soybean values,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, wrote in a report today.

Soybeans for delivery in July added 0.4 percent to $14.33 a bushel at 7:41 a.m. on the Chicago Board of Trade. The weekly increase of 2.4 percent would be the biggest since the week ended Jan. 18.

Corn for delivery in July was little changed at $6.4125 a bushel on volume that was 49 percent below the 100-day average for that time of day. Prices are up 0.8 percent this week.

U.S. corn is now estimated to be about 60 percent planted, Paris-based farm adviser Agritel wrote in an online report today. As sowing of the grain progresses, there’s less risk of acres being shifted to soybeans, the company said.

“U.S. farmers may plant more corn and fewer soybeans than was previously expected,” Arnaud Saulais, a broker at Starsupply Commodity Brokers in Nyon, Switzerland, wrote in a note to clients today.

About 6 percent of the U.S. soybean crop was planted as of May 12, behind last year’s pace of 43 percent and an average of 24 percent in the previous five years, according to the USDA.

Wheat for delivery in July slipped 0.7 percent to $6.8275 a bushel, set for a 3.1 percent loss this week. Milling wheat for delivery in November traded on NYSE Liffe in Paris was unchanged at 208.50 euros ($267.46) a ton.

To contact the reporters on this story: Luzi Ann Javier in Singapore at ljavier; Rudy Ruitenberg in Paris at rruitenberg

To contact the editor responsible for this story: James Poole at jpoole4

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Weekly review for Grains

Rough week for Corn and Soybean because of Corn stock estimates and arrival of South American new crop in Apr and May. Started to talk about China’s bird flu 6 died. It happened in 2003 and 2004 also. Chicken Feed Industry was damaged a lot. It maybe one of factor for Soybean price for future if getting worse. However, at this stage, we have to consider other factors more like tornado or drought in production area.