Hay export quantities are on the rise again in 2015-16, driven by stronger foreign demand, weaker domestic demand that has generated relatively low US prices for hay, and in spite of a strong US dollar. Exports in January-February of 2016 were up 25-35% from the same months last year (Figure 1), and overall 2015 exports increased about 6% compared with 2014 (Table 1). However, 2015 totals were still lower than the peak of 4.5 million tons of hay exported in 2013 (Figure 2).

Figure 1. Export of all hay (alfalfa and grasses) from western ports increased 25-35% in the first two months of 2016 compared with the same period in 2015.

Figure 2. Volume of US Hay Exports from Western Ports by Top 5 Destination Countries, 1998-2015. Over 99% of all hay exports are from western ports. Western ports include all ports in California, Oregon and Washington. Source: US Dept. of Commerce.

US hay exports were valued at about $1.3 billion in 2015 from all western ports, up 7% from $1.24 billion in 2014 (Table 1).

China increases dramatically-again

China remains the major growth market for US hay, importing a record 1.13 million tons in 2015, an increase of 24% in one year - exports to China have increased 5 fold since 2010. The vast majority (82%) of this hay is alfalfa, mostly destined for Chinese dairies. Exports of hay to China were near zero ten years ago, and have increased over 300 fold since that time (Figure 3). The difficulties with testing for traces of GMO hay, and the port strike which occurred in 2014 did not seem to have as important an impact in 2015-16.

Figure 3. Volume of US Hay Exports to China, 2005-2015

Korea imports growing

South Korea has been an important market for some time, especially for grass hays (about 89% of the total).  Korean imports grew by 17% for all hay, and 13% for alfalfa from 2014 to 2015.

Japan imports declining

Japan, still the largest market for US hays, has shown a steady decline in recent years, with exports 21% below what they were in 2006 (Figure 2). Japan imports a large quantity of grassy hays (61% of imports).  

UAE declines after rapid rise

The exports to the United Arab Emirates also declined 24% in 2015 vs. 2014, largely due to large inventory and purchases in 2012-13 (Table 1). Exports to the UAE were also near zero ten years ago, and have risen dramatically after the kingdom curtailed domestic plantings of alfalfa due to water restrictions. In spite of the 2015 decline, exports to the UAE picked up in later 2015 and early 2016 (data not shown).

The strong dollar has been a factor in the decline in demand from both Japan and UAE.

Emerging Saudi Market?

US hay exports to Saudi Arabia in 2015 show signs of a potential emerging export market (Table 1), at least for alfalfa hay. Expectations of increased purchases by the Saudis have been high since announcements by the Royal Family several years ago to curtail domestic production of alfalfa and wheat due to lack of water and the depleted aquifers in the Arabian peninsula. However, such restrictions for forage crops have been slow in implementation, and demand for US forage crops has been mostly unaffected until 2015.  Saudi Arabia, with a population of over 30 million, has large dairy facilities and significant alfalfa production. The largest dairy in the world is in Saudi Arabia (Almarai) with 75,000 cows, and the kingdom has some of the highest production per cow of any nation, requiring quality feeds.  Curtailment of domestic alfalfa production could create an import demand for more than 3 million tons/year, but it is uncertain when (or if) this will occur. Exports in 2015 show the first signs of growth in demand for alfalfa hay (Table 1), but it will remain to be seen whether this is a long-term trend or a temporary blip, since rumors have been rife for several years on this issue. Saudi companies have recently purchased land in the US and other countries for hay production for export to the kingdom. Other countries in Europe (primarily Spain, France and Italy) and north Africa (Sudan, Egypt, Morocco) may be in a more favorable position to export to Saudi Arabia, so any growth in demand from that country will only partially be met by US production.

Hay Exports a Small Component of US production, but significant in the West.

In spite of an increase in demand for hay from foreign buyers, hay exports remain a minor component of the US market for hay. The vast majority is used domestically. Approximately 4% of alfalfa and 3% of grassy hays produced in the US are exported (Figure 4). However, in the seven western states (which produce most of the hay for export), an equivalent about 12.6% of the alfalfa is exported and 45% of the grassy hays are exported (Figure 5). These grassy hays consist primarily of timothy hay from the Pacific Northwest, and sudangrass, kleingrass and bermudagrass from the Southwest.  In specific regions of the West such as the Columbia Basin of Washington-Oregon and the Imperial Valley and Palo Verde Valleys of Southern California, the percentage of hay produced exported is higher than this amount. In terms of production, grasses consist of only 21% of western hay production, but nearly 50% of the export hays (Figure 6).

Domestic Dairies still the most important market for alfalfa.

In spite of a reduction in the amount of alfalfa in the ration of dairy cows (estimated at below 8 lbs./day in California in 2015, CDFA), domestic dairies are still the primary market for alfalfa hay. Corn silage, corn grain, soy and canola meals, small grain forage, and byproducts (e.g. almond hulls) have become a larger component of rations in recent years, but alfalfa remains important. The exact percentage is unknown, but is likely that over 70% alfalfa in California goes for dairy production, and it may be closer to 75 %. California also attracts between 600,000 and 1 million tons of hay from neighboring states, some of which is for dairies, and some for export or horses (or minor uses like beef and sheep). Due to the movement of hay from all over the West, it is challenging to determine exactly the origin of the hay for exports or even for dairy production. Domestic horses are also a very large market for alfalfa hay and grassy hays, and according to some estimates are likely to be more important than exports (Hoyt, 2014, California Alfalfa Symposium proceedings).  

Implications

It is clear that exports are here to stay—having transitioned from a very minor component of western hay markets to a more important market factor, albeit so far limited to the 10-20% of production in the West. It is unlikely that hay exports will take over the demand from domestic dairies in the near future – currently nearly 50% of US milk production comes from the 12 western states after a rapid western expansion (the percentage was 17% in 1970). But export demand has been a welcome relief for hay producers when the price of alfalfa hay takes a nose dive, as it has in the past 1 ½ years. The demand from both dairies and exporters is for higher quality hay has increased the influence of quality on price. The western (primarily California) drought and the changes in land use (rapid increases in orchards and vines) has had an effect on alfalfa acreage – we are now at the lowest alfalfa acreage since the 1940s - but the changing nature of dairy rations and the rise in export demand has had an important influence on alfalfa markets and is likely to continue to do so in the future.

Figure 4. Share of US hay production exported, 1998-2015. Source: US Dept. of Commerce and USDA-NASS

Figure 5. Ratio of Western Exports to Western Production shown as a Percentage. Western states include Arizona, California, Idaho, Nevada, Oregon, Utah and Washington. Western ports include all ports in California, Oregon and Washington.  Source: US Dept. of Commerce and USDA-NASS. Note: although some exported hay comes from other states, it is thought that a vast majority originates in these 7 states.

Figure 6. Only 21% of the production of hay in the 7 western states is grassy hay (not alfalfa-A), but grasses make up nearly half of hay exports (B). Source, US Dept. Commerce, USDA-NASS.  The largest market for western alfalfa is still domestic dairy production.