Alfalfa Exports Surge

May 28, 2012 11:08 PM

By Rick Mooney

How they impact prices varies by region

China’s entry into the U.S. alfalfa market is being blamed for both a surge in exports and higher Western hay prices.

While it’s true that China’s appetite for U.S. alfalfa has grown an astounding 76-fold since 2007, it lags far behind Japan and the United Arab Emirates (see "Alfalfa Export Facts" below).

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Overall, alfalfa export volume surged 14% last year, and alfalfa hay prices in many parts of the western U.S. soared to record or near-record levels. Other factors are also in play.

"Strong export sales undoubtedly played some role in pushing up alfalfa prices in parts of the West last year," says Matt Diersen, an ag economist with South Dakota State University Extension. "But you can’t put any kind of dollar value to it. There are just too many other variables to consider."

Among them are a buildup in dairy cow numbers, which created very strong demand for alfalfa hay in the western U.S., and a major supply shortfall in alfalfa production, due mostly to a decrease in alfalfa acreage. "Both of those factors likely had as much, or more, of an impact on alfalfa prices as export sales," Diersen says.

More than 99% of all the alfalfa hay going for export is grown in seven western states—Arizona, California, Idaho, Nevada, Oregon, Utah and Washington, according to the National Alfalfa and Forage Alliance.

In most years, the lion’s share of export alfalfa comes off fields in or near the Imperial Valley of California and the Columbia River Basin of Washington/Oregon. In any given year, as much as 25% of the alfalfa grown in those two areas moves offshore.

The net result is that up-and-down movement in export volume can play a major role in determining hay prices in those regions. "If you’re a dairy producer buying hay in Missouri or Wisconsin or New York, you’re not likely to pay much attention to what’s going on with export markets," Diersen says.

Also coming into play last year were early-season weather glitches that crimped the overall quality of alfalfa produced in the Imperial Valley and Columbia Basin. That forced exporters to go further afield than normal—Utah, Montana, Colorado and elsewhere—to fill orders from their overseas customers.

hay exports chart

"It definitely had a ripple effect throughout the system," says Katelyn McCullock, dairy and forage economist with the Livestock Marketing Information Center. "As export buyers moved into areas where hay was available, there was more pressure on local hay supplies and prices."

In turn, export firms were often willing to pay relatively high prices for dairy-quality alfalfa. That caught the attention of local dairy producers competing for the same scarce supplies. "It’s similar to local land prices," says Stephen Koontz, an ag economist with Colorado State University Extension. "There’s a going market price and a top of the market price. The price everyone pays attention to is that top of the market."

Last year, Koontz notes, alfalfa exporters were the ones paying the market-topping price.

Alfalfa Export Facts

In 2010, 4% of U.S. alfalfa production was shipped overseas, twice the share that was exported in 2000. While steady gains in alfalfa exports throughout the decade help explain the increase in price, a 15% drop-off in U.S. alfalfa production during that period also played a role.

Alfalfa export sales remained brisk in early 2012. According to USDA’s Foreign Agricultural Service, nearly 328,000 metric tons were exported in January and February. During the first two months of 2011, alfalfa exports totaled 283,000 metric tons.

Roughly 95% of the 1.6 million metric tons of alfalfa exported by U.S. firms in 2011 went to just five countries: Japan, South Korea, Taiwan, China and the United Arab Emirates (UAE). Total exported value was $397 million. Japan, traditionally the biggest buyer of U.S. alfalfa, purchased more than 585,000 metrics tons from the U.S. last year.

China and the UAE are the faster-growing markets. In 2007, China purchased 2,300 metric tons of alfalfa from U.S. suppliers; last year, it imported more than 177,000 metric tons. Shipments to the UAE rose from just under 28,000 metric tons in 2007 to more than 527,000 tons last year. Both countries have launched efforts to increase dairy production to satisfy growing consumer demand.

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