California’s alfalfa acreage is the lowest on record, bringing the state’s annual total production back to levels produced by Idaho and Montana, impacting hay movement and the Western export industry. Changes are also impacting capital investment. Increasing hay pressing capacity is occurring in the Northwest U.S., with five presses added in Washington and northern Idaho, boosting the area’s presence in the export market. Two additional hay presses were nearing operation in southern Idaho.
In addition, northern Idaho is an attractive environment to grow dryland timothy, displacing traditional bluegrass and wheat rotations. Weather diversity in the region allows for greater maturity ranges and increased supplies of high-quality grass hay.
Christy Mastin, international sales manager at Eckenberg Farms in Mattawa, Washington, said there’s been a steady stream of potential hay buyers visiting their company daily to inspect new-crop hay. With rain impacting the first cutting of timothy and reducing crude protein and relative feed value of alfalfa, higher grades of hay are in short supply.
The U.S. trade picture looms large. China has implemented retaliatory tariffs on a wide range of U.S. agricultural products, including hay. One estimate put the tariff impact at about $85 per metric ton.
“The China tariff is a concern,” Mastin said. “What we are finding is that the customers that have a connection to a dairy are less likely to change, cancel or delay the orders than those that have no connection. If customers in China are just buying and selling hay as a commodity, they will not want to take the increased cost.”
“There is concern how long this will last and what that it will do to pricing and demand,” she said. “I’m sure there will be alfalfa of other origins like Spain or Canada sold to China to fill their need at lower prices.”
Hay presses are being added in British Columbia, Alberta and Ontario, Canada, and alfalfa acreage under irrigation is increasing in the Sudan and Pakistan, increasing competition for Chinese and Saudi Arabian markets.
In 2017, U.S. alfalfa commanded an 87 percent market share in China. Of the 1.19 million tons exported from the U.S. to China, one-third came from the Northwest. Chinese demand represents roughly 20 percent of Northwest exports, but prior to the proposed tariffs, Northwest market share was increasing. In April, Northwest ports surpassed the ports of Los Angeles and Long Beach as the largest hay exporter to China, according to the Hay Market Snapshot.
Normally, China would be able to buy oat hay from Australia as a partial substitute for U.S. alfalfa. However, drought conditions have limited the supply of exportable hay in south Australia, Victoria and New South Wales.
Dairy remains the biggest hay customer in the West, and dairy profitability is a concern, not only in the U.S., but also China. With unprofitable returns during the first half of 2018, dairies remain less active in alfalfa markets. The escalating trade war with China has also added a bearish tone to feed grain markets, which may make grain substitution in dairy and cattle feedlot rations more economical, reducing reliance on hay.
If Chinese tariffs depress exports, it could lead to an oversupply of good-quality hay that is too expensive for cattle markets but not high enough quality for dairies. On the flip side, if tariffs are removed, there could be pent-up demand as the supply chain refills. 
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Dave Natzke
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- Progressive Forage
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