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Hungry for Hay

November 2, 2011
By: Fran Howard, AgWeb.com Contributing Writer
 
 

Alfalfa growers cater to export market

Exporting forages to Asia or the Middle East might not be every-one’s forte. But, answering the call of booming hay exports in recent years, some alfalfa producers in the Pacific Northwest have geared their operations to overseas markets.

Between 2006 and 2010, hay exports (defined by USDA as animal fodder) grew by 41% to 3.95 million tons, according to USDA. Japan is the top market for U.S. hay, but Chinese demand is coming on strong. In the same time frame, exports to China increased from 420 tons to 230,281 tons.

As demand for western-based diets increases in Asia, the need for hay is expected to rise as Asian consumers step up their purchases of cheese, yogurt, pizza and meat.

Demand for U.S.-grown hay is also increasing in the Middle East, particularly from the United Arab Emirates (UAE). In 2006, the UAE imported 40,852 tons of animal fodder from the U.S.; in 2010, imports increased to 334,483 tons.

"Middle Eastern governments are changing their policies toward water," says Jeff Calaway, owner of Calaway Trading, Inc., in Ellensburg, Wash. "Water is becoming more valuable than oil in those countries." As the Middle East pulls back on agricultural subsidies, Calaway says, it will import more alfalfa and other agricultural products from the European Union, U.S., Australia and South America.

Vertical Integration. Lared Whitby and his three brothers run Whitby Ag Enterprises, a vertically integrated export business near Pasco, Wash. In 2010, the 3,000-acre operation exported 50,000 tons of alfalfa, with about 27,000 tons grown on-site. The rest they purchased from other alfalfa growers. The Whitbys ship mostly to Japan but also to UAE and Korea. To meet export demand, the brothers recently purchased another 2,000 acres of prime alfalfa-growing land.

"We don’t deal with importers or brokers," Whitby says. "We deal with wholesalers and distributors. We are going as close to the customer as possible." Although Whitby can speak both the Mandarin and Cantonese dialects of Chinese, he has not yet shipped to China because the prices offered are lower than what other countries are willing to pay. Japan is currently paying $475 per ton delivered to Japanese ports, while China is offering $30 to $50 less, Whitby says.

The brothers decided to vertically integrate in 2000 after having paid an exporter for nearly a decade to compress their alfalfa into bales that fit into shipping containers.

"To support all four families, we needed to vertically integrate. We can produce about half or more of what we export, so the risk wasn’t that great," Whitby says. "To maximize profits, you integrate to the extent that you can." The only part of the supply, production and distribution chain the brothers don’t own is the oceangoing vessels. They even own the trucks that deliver the alfalfa to the ports of Seattle, Portland and Tacoma.

Hungry for hay
Alfalfa bales for export are compressed to typically half the size of conventional bales to make moving among various modes of transportation easier.

Bound Overseas. To compress for export, the brothers first leased compressing equipment for a year. In 2001, they purchased their first compressor, and then updated the equipment in 2007 for $1.6 million.

Calaway also compresses hay for export, but he doesn’t grow his own alfalfa. Instead, he purchases alfalfa from about 200 producers in Washington, Oregon, Idaho and Montana and then compresses it for export. He also custom harvests alfalfa for local growers. "About 15% to 20% of my business comes from land with standing crops," Calaway says.

Compressed bales are typically half the size of conventional bales and can be loaded more easily into intermodal containers, steel shipping containers that can be moved from one mode of transportation (truck, ship, rail) to another without having to be reloaded.

Calaway has three facilities and four presses that compress hay for export, all in Washington and Oregon. He also owns trucks, fork lifts and container handlers. "You need to make a fairly significant investment," he says.

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FEATURED IN: Top Producer - November 2011

 
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