Getting hay to markets on the other side of the world

KENNEWICK — Nearly all U.S. hay exports, both alfalfa and grass, leave in containers loaded on to ships at West Coast ports.

And nearly all of those are bound for dairy farms in Japan, Korea and — increasingly — China.

Speaking during a presentation at the Northwest Hay Expo on Jan. 20, William Matthews, an agricultural economist at the University of California Davis, said 61% of all hay sold on international markets is sown, grown and swathed in the United States.

Changing demands in the market, shipping woes and labor worries have experts working to manage imports and exports from Washington state. That includes growers and producers in the Columbia Basin.

Market trends

While U.S. dairy farmers have been looking for ways to decrease the amount of alfalfa hay they feed to their cows as a way to reduce production costs, Matthews said the increasingly large, urban dairy farms of Japan, South Korea and China are looking to increase production and improve the quality of their output.

“The United States stands as a supplier of alfalfa hay products in a global market,” Williams said. “We’re quite dominant and can produce a high quality product at a fairly low cost relative to everyone else.”

During his presentation, Williams presented data that showed U.S. alfalfa hay exports in 2021 were at around 3 million metric tonnes. Slightly more than half of that set went to China. Japan was the second largest customer, followed by South Korea and Saudi Arabia.

The total value of U.S. alfalfa hay exports has also steadily risen from around $600 million in 2014 to a little more than $1 billion in 2021, while the value of grass hay exports only rose slightly to around $479 million over the same period, Williams said.

According to the U.S. Department of Agriculture, the U.S. shipped about $350 million in grass hay in 2014.

Williams said rising demand in China is the result of that nation getting richer and the resulting change in Chinese diets. Chinese consumers are now drinking more milk and eating more pork, he said.

“On average, their personal wealth has gone up,” Williams said. “They’re demanding higher quality, more animal protein products in their diet. And dairy is no different.”

Chinese dairy farms are getting bigger, dairy operators are investing more in animal genetics to improve herds and are willing to spend more on high quality feed like alfalfa, Williams said.

“Because if they’re going to put this kind of investment in their animals in the area operations, then they’re going to want to make sure they feed it the right kind of dairy ration in order to get productivity and the quality that they demand,” he said. “So that’s why you can really see the increase in exports to China over the last decade.”

In addition, Williams said the Chinese government has been promoting milk as a way to stave off COVID-19 and promote health, especially as part of the delayed 2020 Winter Olympics held this year.

Shipping woes

Because of this, the imbalance created in international shipping — particularly strong demand for Chinese made products in the United States leading to an economics of shipping that make it more profitable to send back empty containers than fill them with hay, apples, potatoes or other American-made products — is posing a particularly difficult problem for hay exporters, Williams said.

This problem was also highlighted by Scot Courtright, logistics manager with Courtright Enterprises in Moses Lake and treasurer of the Washington Hay Growers Association.

“Over the last 18 to 24 months, each month has gotten continually more challenging or difficult to continue shipping,” Courtright said during a Hay Expo presentation.

Courtright said early in the pandemic, during the first three months of 2020, he watched ship transits on the PN1 line — the North Pacific transit route from Tokyo to Seattle and back that also includes stops in Vancouver, Canada, and Kobe, Japan, with feeder lines to Nagoya, Japan, the Chinese ports of Xiamen and Ningbo and the port of Kaohsiung in Taiwan — fall steadily after news of Chinese factory closures and strict lockdowns of Chinese cities.

“So the second quarter, the challenge was trying to get enough bookings and reservations with carriers to ship back,” he said. “That was the first kind of big challenge that we had to tackle.”

However, once the U.S. government started making stimulus payments, U.S. demand exploded and importers had to work hard to catch up, Courtright said. Eventually, giant container ships began backing up at anchorage outside the major West Coast ports. Concurrently,the price to bring a cargo container of imports rose far faster than the cost of shipping out exports. An empty container might be turned around — sent back to Asia and filled up with exports — in 60 or 65 days, Courtright said, whereas filling that container with an export product in Seattle or Long Beach would double the turn-around time.

Sending back empties simply made shippers more money, Courtright said.

“So the carriers are very mindful of when we ship an export product back, we tie up the container for longer,” he said.

However, Courtright said growers should feel confident about their ability to export because hay is still shipping from West Coast ports. The biggest challenge right now is that shipping schedules on routes like the PN1 have been severely disrupted, making it difficult to get loaded containers onto the right ships. Courtright said he currently books freight space eight weeks in advance. He will sometimes tell shippers to have containers and trucks ready to load at particular time on a particular day, only to have the Port of Seattle say that ship is not available or in port for loading and unloading. Port authorities tell him the issue is out of their control, Courtright said.

Such issues lead to a lot of uncertainty about when cargoes can be loaded and forces both shippers and farmers to act quickly Courtright said.

“If you go back a couple of years this rarely happened. It was not a common thing for vessel orders to change for different services to come in a different order than we had booked and that presents the biggest challenge that we’re facing now,” Courtright said. “It’s certainly not something we want to do, or we like doing, but it’s the reality of the situation that we’re living in.”

Labor concerns

It also doesn’t help that the ocean carriers operating out of the ports of Seattle and Tacoma are getting ready to negotiate a new contract with the International Longshore and Warehouse Union, which represents dock workers, given the current contract expires in June.

“We generally, — as shippers and U.S. producers — we have to sit back and watch,” Courtright said.

John Wolf, the CEO of the Northwest Seaport Alliance, which oversees the operations of both the ports of Seattle and Tacoma, said the alliance also has to sit back and watch the contract talks. The organization doesn’t expect those talks to actually start until April at the earliest.

“They’re pretty tight-lipped about it and that’s frustrating for us, because we’d like to see it sooner rather than later,” Wolf said.

Wolf said the biggest issue labor might bring up in the talks is automation — something that hasn’t happened at Pacific Northwest ports yet.

“I don’t believe wages and benefits are going to be a big deal because the labor force recognizes that they’re paid well, and their benefit package is rich,” he said. “What they’re worried about is jobs and preservation of their jobs. And when they see automation, they see a reduction in jobs.”

However, automation and technology are not the same things, Wolf noted, and labor has been very open to the expanded use of technology — such as bar code readers scanning trucks on their way in so those trucks don’t have to stop — to speed up port operations and make them more efficient.

The last time the two sides sat down to reach a new contract in 2014, the talks lasted for months and required federal intervention to conclude, Wolf said. He was, however, unwilling to speculate on what effect lengthy contract talks could have on summer and fall exports.

“So we’re going to watch it closely, but it’s going to be a sticky conversation,” he said.

Charles H. Featherstone can be reached via email at cfeatherstone@columbiabasinherald.com.