Hay Exports Rebound Only to Slip Again

Jul 5, 2019  | 6 min  | Ep4446

Earlier this week, USDA announced that prevent plant acres will be eligible for the next round of Market Facilitation Payments if farmers planted a cover crop.

After a spring that kept many planters idle, grain farmers welcomed the relief in the face lost export opportunities.

The loss of markets can happen in an instant either through trade disputes or labor disagreements.

A few years ago, western hay growers got caught up in a dockside dispute that devastated their markets.

Colleen Bradford Krantz has more in our Cover Story. Producer contact colleen.krantz@iptv.org

 

In the summer of 2014, West Coast hay producers were well into their harvest season when contract negotiations between port workers and ship owners fell apart. For those growing alfalfa and other hay varieties for export, news of closures and labor slowdowns at 29 ports along the West Coast had producers listening carefully.

PBS Newshour broadcast: Christopher Thornberg, Beacon Economics, Los Angeles: “….indeed even a financial hit for some companies. But on the macro sort of level, where we look at the winners and the losers, overall it doesn’t really mean all that much for the U.S. economy or even here in southern California…”

Those growing hay for export disagree with assessments that downplayed the impact of the nine-month labor dispute. By then, many forage producers in California, Washington and Oregon had taken a major financial hit, particularly those trying to get their products to international buyers in Asia and elsewhere.

Jon Berker, Golden Eagle Hay: “That was a very difficult time for exporters here in the Imperial Valley, or anywhere on the West Coast. We couldn’t ship anything out. We had standing orders.”

Marcel Van Dijk, marketing manager for the Port of Los Angeles, said the resulting congestion at the ports was especially hard on those with hay or other perishable products.

Marcel Van Dijk, Port of Los Angeles: “Some you can’t store too long or it is very expensive to store in cold storage…. If you can’t ship to the market, quality deteriorates and then you don’t get your premium price in the foreign markets. … So it is very hard for the supply chain to deal with those disruptions.”

Golden Eagle Hay, a Calipatria, California–based grower, began exporting alfalfa pellets out of the Imperial Valley in 1963 - long before many other producers in the area. By 1980, the company had shifted to bales compressed for transport in shipping containers. Today, many others have joined them in trying to supply the Asian market with forage.

Jon Berker, Golden Eagle’s general manager, says some of their longtime customers had to turn elsewhere when the company, which now buys 80 percent of the hay it sells, was unable to get animal feed delivered on time because of labor disputes at the port.

Jon Berker, Golden Eagle Hay: “So we were not able to ship over there to Japan. This is just one example with Japan. So the cattle and the dairy cows have to eat. So what Japan did was they went …and bought timothy from Canada and Australia, and oat hay instead because they had to feed their animals.”

Those in the hay export business were suddenly stuck storing the old hay crop as the new season approached. Some turned to nearby dairies and horse ranches, matching or undercutting domestic prices in hopes of emptying their storage sheds. According to USDA, hay prices across the country dropped by 25 percent between 2014 and 2016, with steeper declines along the West Coast. Those who grew primarily for domestic customers also began to feel the pinch as the market flooded with hay originally bound for other ports of call.

Jon Berker, Golden Eagle Hay: “Well, anytime you have oversupply, you know the price will drop. Domestic dairymen, any dairymen, cattle guys, they’re pretty smart. And if they have offers for cheap fiber, they’ll change their menu or change their ration.”

The same scenario was playing out farther north, in Washington and Oregon, where the ports were affected by the same labor negotiations. Hay exporters were reluctant to use truck or rail due to the slower delivery time that could leave customers waiting in Asia with a dwindling feed supply.

The labor dispute was finally settled in February of 2015, but the ports needed several months to return to business as usual.

While Golden Eagle weathered the storm, in part because of major costumers from Japan and Taiwan who remained loyal, it took much longer for hay prices to rebound.

Jon Berker, Golden Eagle Hay: “But at least we had a home for it. A lot of guys didn’t have a home for it. They didn’t have the relationships that we have, that we built over …20 years.”

U.S. hay exports continued to show signs of growth until last year as some customers returned to their original suppliers. But exports slipped in 2018 as the U.S.-China tariff battle grew. A decision in Saudi Arabia to phase out forage production to cut water consumption helped prevent a greater backslide. One Saudi Arabian company went so far as to buy land in the Imperial Valley to grow its own hay.

Marcel Van Dijk, Port of Los Angeles: “The traditional markets were always Japan and Korea because they still have cows and all the other animals there, but they didn’t have enough land to cultivate food for them… But you see now also more of the Middle East is coming up.”

An unusual agreement to extend the new labor contract at West Coast ports from 2019 to mid-2022 may have contributed to overseas customers having increased confidence in U.S. producers.

Marcel Van Dijk, Port of Los Angeles: “Most of that cargo is coming back after the actions are winding down and now with an extension of the contract, that gives a lot of trust in the West Coast again.”

Despite the good news, the major hay exporters working 200 miles away in the Imperial Valley are unwilling to get caught in the middle again.  Most are making contingency plans.

Jon Berker, Golden Eagle Hay: “It was definitely a difficult time. This one hurt. It really did hurt.”

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