China’s growing dairy sector sees forage demand rise

The oft-ignored offshore forage market is getting bigger, even while some traditional markets are getting smaller, says the head of the U.S. forage exporters’ organization.

“2016 registered the first time the Chinese market (was) a bigger export market than Japan,” John Szczepanski of the U.S. Forage Export Council said during the Canadian Forage and Grassland Association’s annual meeting in Winnipeg Nov. 16.

“We’re seeing very world class equipment and facilities (being built in China) that demand similarly high quality input. That has created for us a great market.”

Szczepanski said U.S. forage exports now total US$1 to $1.2 billion per year, with Japan and South Korea usually making up more than 50 percent of the market.

In 2016, not only did China become a larger volume market than Japan, but Japan and South Korea dropped to less than 50 percent of the overall market for the first time.

Szczepanski said the changing dynamics of the market come from the increase in Chinese demand, a gentle decline of Japan and South Korea and shifting demand in the Middle East.

China’s growth is all about booming consumer demand and the desire of Chinese consumers for high-quality, safe dairy products, he said.

The Chinese government has embraced the idea of high-quality alfalfa as the basis for high-quality dairy products, so until the country can produce enough of its own alfalfa, its dairy farmers are being pushed to buy good offshore alfalfa.

Szczepanski said the Chinese market is hard to work with be-cause of both complex regulations and multiple differing interpretations of regulations in different areas. However, it is an excellent long-term market for American forage exports.

Japan and South Korea are declining in demand because of an aging population and, in Japan, a shrinking number of dairy farmers. Fewer consumers and farmers mean less demand for forages.

However, Japan is the top-paying customer for the U.S. industry, so it is still a key focus of exporters, Szczepanski said. Not only does it pay top dollar, but it’s farmers know how to use a wide variety of forages rather than just alfalfa.

“For any forage that we grow in the western United States, alfalfa might represent 50 percent of our exports to Japan, but whatever we grow, the Japanese have a place for it.”

Szczepanski said Middle Eastern demand has shifted in recent years as the United Arab Emirates became a less dependable market. However, the Saudi Arabian market is seen to offer growing long-term potential, especially with challenges to irrigation.

The Saudis are also willing to pay for quality forages.

“The dairy industry there matters,” said Szczepanski.

The biggest challenge to the growth of the American export forage industry is transportation, he said. The bankruptcy of a major world shipping company recently rattled overseas buyers.

“When Hanjin shut off, it impacted a lot of product that was sitting on the water,” said Szczepanski.

“Having a transportation network that works is critical for us.… Where we don’t have reliable supply, best in the world doesn’t mean anything.”

Szczepanski also said being “best in the world” doesn’t always mean having the best product or marketing strategy.

“Our customer base is not asking for the best in the world,” he said.

“They are asking for good product at a reasonable price. Trying to tell people that we’re the best in the world only goes so far.”

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