Did port slowdowns bust our hay export boom?
While Washington's farmers rejoiced at the recent resolution of the four-month-long work slowdown at West Coast ports, the ill effects of that protracted labor dispute are not over yet. Months of late shipments have overseas markets skittish about American trade. That concern promises to linger for Washington-grown apples, wheat, potatoes and especially hay. Yes, hay.
If I asked you what Washington grows you’d probably mention apples, cherries, wheat and wine grapes. You might even think to add potatoes to the list. But hay isn’t on most people’s radar, despite the fact that it is one of the state’s most important crops.
According to census data from the U.S. Department of Agriculture (USDA), hay was valued at $720 million in 2014, placing it fourth among Washington crops — right behind apples, milk and potatoes, just ahead of wheat and well ahead of wine grapes. In fact livestock feed, which is primarily hay, is Washington’s number one agricultural export by volume, according to the Port of Seattle.
Hay exports have grown dramatically in recent years. Peter Tozer, an agricultural economist at Washington State University, says that in the last decade Washington’s hay exports increased by about 128 percent. While it’s difficult to arrive at an exact number in terms of volume, Tozer estimates that more than half of all hay grown in Washington today is exported.
Or, it was.
Along with other more perishable goods, the hay market has taken a significant hit from the recent dockworker slowdown that crippled all West Coast ports, including Seattle and Tacoma.
Hay is not a newcomer to the agricultural export market, but overseas demand has skyrocketed in recent years. Most of this homegrown feed, which consists largely of timothy grass and alfalfa plus a few other minor crops such as orchardgrass and sudangrass, was sold domestically. But the appetite for hay in Asia, where meat and dairy industries are rapidly growing, has boosted both exports and the price of U.S. hay.
That was great news for Washington hay farmers. Tozer said that last year, the lion’s share of Washington-grown hay was shipped to Japan, South Korea and China. The United Arab Emirates, where water to grow feed for camels and other livestock is scarce, is a relatively newer export destination.
So why is Washington-grown hay so hot overseas? “Here in the Columbia Basin with our water, hot days, cold nights and fertile soils, we can grow really high quality, high protein alfalfa,” says Columbia Basin farmer Jim Baird, who calls Washington hay some of the best in the world.
Baird, who has been farming near Ephrata, Washington for 40 years, grows a variety of crops, including apples, potatoes, onions and alfalfa hay. Altogether, the 61-year-old farmer manages close to 900 acres of production on his family farm. He sells his hay to a variety of customers, including dairies, feed stores and hay exporters.
The business of moving hay around the globe, anywhere really, is challenging. For one thing, hay takes up a lot of space. In fact, it consumes more shipping space than any other U.S. agricultural product. High-pressure compression technology can now scrunch an average hay bale down to half its size, doubling (to 24 tons) the amount of hay that can be squeezed into a standard 40-foot container. But hay is a relatively low-value commodity and even the slimmed down product is at a disadvantage in the fierce competition for container space. That is especially true now with the backlog of cargo created by the work slowdown.
Last year saw a bumper crop of hay in Washington, says Loren Lorentz, president of the Washington State Hay Growers Association and a hay grower himself. “A lot of hay was produced and it needed to move flawlessly,” he explains. “We needed every bit of that hay to move out of the country, so we wouldn’t have carryover to 2015."
Unfortunately, much of last year's hay got stuck in country, stranded by the dockworker slowdown that forced some hay brokers to move product at just 50 percent of capacity. Lorentz says it could be six months before cargo is moving normally again.
Jim Baird has noticed a lot more hay stacked up in fields than is normal for this time of year — hay that has been sold and is waiting to be shipped out. Last fall the price for hay was good, says Baird. So good that he held out for the higher price that winter often brings. In retrospect, that was a mistake. By mid-February, Baird was forced to sell his hay for 25 percent less than he’d planned.
The port slowdown has certainly affected prices today, but many brokers and growers worry more about its impact on the upcoming season and beyond — for three reasons.
First, negotiations over the futures price of other ag commodities don’t usually swing into high gear until the growing season for those crops begins. But that’s not the case with hay. Market-setting contracts for summer hay are being negotiated now, says Shannon Neibergs, Washington State University Extension economist. That makes the impact of the port slowdowns even “more dramatic.”
Another worry, says Neibergs, is that hay exporters start to write contracts for summer production in the spring, based on expected demand and market conditions. This spring, exporters are looking at “a backlog of inventories they still need to move and increased competition from Canada, New Zealand and Australia,” which means contracts may be trickier for growers to negotiate and spring planting may be slowed.
Finally, says Neibergs, there’s the trust gap. “There are tough negotiators on the Asian side," he says, "and exporters are going to have to regain their confidence.”
In terms of volume, the impact of the slowdown is unlikely to linger beyond this market season. But Neibergs believes that, port slowdowns notwithstanding, U.S. exporters who couldn’t deliver on their hay contracts last fall will have to work extra hard to wrestle market share from their foreign competitors.
Loren Lorentz concurs.
“What we've seen in dollars lost so far is just a speck in the grand scheme of things,” he says. “It’s going to take years to develop the trust that we had with [foreign markets] to get hay consistently and timely. And this is not only [a problem for] hay; it's for all ag commodities. All commodities really.”
Lorentz is glad that the dockworkers are back. But, he cautions, "we haven't solved the bigger problem. This labor issue is going to come back up.”