Alvin Penner sounds mainly optimistic about the outlook for global hay markets and the opportunities for prairie producers to sell into them.
Penner is manager of special projects for NAFTAC Commodities, a company that exports agricultural commodities around the globe.
At a recent hay marketers symposium in Winnipeg, he pointed to a number of markets that have the potential to expand either in the short- or long-term.
That expansion could bode well for prairie forage producers, although they can continue to anticipate keen competition in the global marketplace.
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The United States, Japan and South Korea remain the most eager to import forages from Western Canada.
The U.S. imports high quality alfalfa and grass hay for its dairies along with high quality grass hay for its horse industry. Japan and South Korea are prominent importers of timothy hay for their dairy herds.
U.S. dairy farms could return to profitability this fall, Penner said, due to anticipated increases in milk prices. That would encourage American dairy farmers to raise their milk production, which would see more forages being fed.
Opportunities to market horse hay into the U.S. are greatest in areas east of the Mississippi River, Penner said. He described the American market for horse hay as fragmented, meaning there are a lot of horse owners who are spread over a wide area, often with only a small number of horses and therefore buying in smaller volumes.
While there is potential for that market to grow, Penner said Eastern and Atlantic Canada are also showing more interest in supplying it.
He noted that the U.S. farm bill passed last year could bode well for Canadian forage producers. The farm bill gives strong price support to crops such as wheat. Without the same level of support for hay, it is likely there will be less hay grown in the U.S., Penner said.
Meanwhile, in Japan, imports of hay reached record levels last year. The country’s dairy farms are importing smaller volumes of hay cubes, but the demand for baled hay continues to rise.
Penner said milk fat is highly sought after in Japan and earns producers a premium. Increasing the length of hay fibre is one way to increase the amount of fat in milk.
Penner would not speculate on how much more expansion can be expected in the Japanese hay market. Some of the main competitors for that market are the U.S., Australia, Chile and China.
In South Korea, dairy producers are adopting production practices akin to those in Japan, which has pushed up demand for grass hay over the past decade. Penner expects that trend to continue for at least the next couple of years.
Tariffs on hay imports continue to influence how much hay South Korea imports, although those tariffs are being relaxed.
During his presentation at the hay marketing symposium, Penner said Europe and China are two of the biggest question marks.
Hay production is heavily subsidized in the European Union. An important issue is whether those generous subsidies will be extended to countries in Eastern Europe wanting to join the EU. Extending those subsidies would mean more forage production, and potentially more competition in markets that Canadian prairie producers now sell into.
Penner said China has huge potential to produce forages, but there is skepticism about the country’s quality controls. China also lacks the infrastructure to move large volumes of hay into an export position.
New opportunities may emerge in the Middle East, the Caribbean, Thailand and India.
The Middle East is backing away from using irrigation to support forage production for its livestock, said Penner.
The Caribbeans “love doing business with us,” he said. “They love Canadians.” Although freight costs are a hindrance to exporting forages there, that could change with increased trade between that region and Canada.
Meanwhile, dairy products are becoming increasing popular in Thailand, a country that Penner described as “a sleeper” in terms of its potential as a forage market. Forage demand could also increase in Thailand as it shakes off the economic crisis that struck there in 1997.
India, with its rapidly growing population, has the most dairy cows in the world. Penner said Indians are familiar with dairy products and love eating them.
Imported forages could help boost milk production there, and with companies such as Nestlé investing, an increased demand for imported forages is possible, Penner said.
