China's dairy industry sparks surge in U.S. alfalfa exports
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By Breanne Brammer
WASHINGTON, June 25, 2014 - China's growing dairy sector continues to spur a surge in U.S. alfalfa hay exports, helping to push prices for the livestock feed to four years high in parts of California.
According to USDA's Foreign Agricultural Service (FAS), alfalfa exports to China in the year ended April 30 totaled $186 million, a 50 percent jump from the previous 12 months.
Population growth, urbanization and increased incomes have caused a boom in the Chinese dairy industry. According to a FAS forecast, China's fluid milk consumption will surge 7 percent this year to 38.5 million tons. Demand is increasing for products like infant formula, milk powder and yogurt, with overall dairy imports increasing 67 percent this year, FAS says.
Fred Gale, senior economist for the USDA's Economic Research Service, is currently in China to discuss livestock and alfalfa feed issues. In an e-mail, he said the demand for alfalfa reflects a structural shortage of nutritious feed in China's dairy cattle industry.
“China is trying to boost domestic fodder production but land is scarce and expensive,” Gale said. There is also a scarcity of water in northern China, where most dairies are located, and alfalfa is a water intensive crop. Southern China lacks the pasture for fodder crops, he said.
Gale said a majority of U.S. alfalfa exports to China come from the western region, which is also experiencing water shortages, limiting production. Almost 40 percent of alfalfa hay is produced in 11 western states, where in mid-June 60 percent of the region was experiencing at least moderate drought, according to the U.S. Drought Monitor. Almost 6 percent was going through “exceptional drought,” the highest drought intensity level.
Brian Gould, agricultural and applied economics professor at the University of Wisconsin, Madison, said there can be significant difference in regional hay prices. California prices are at a four year high due to the drought while prices in the upper Midwest are trending downward he said. According to the USDA California hay report, export alfalfa from the Inter-Mountain region was recently going for $286 a ton.
China is one of the top five hay export markets globally, according to the FAS. Overall U.S. alfalfa exports reached a record $1.25 billion in 2012. The U.S. is the primary alfalfa supplier to China because of its high quality.
Drex Gauntt produces around 2,000 acres of alfalfa on Gauntt Farms near Wallula, Washington. He said overall prices of western hay have increased and are often affected by regional weather patterns. Gauntt is seeing a national trend of farmers producing less alfalfa and opting to switch to more profitable crops.
Better alfalfa breeding has allowed production to stay consistent, despite the drought, but Gauntt said demand is increasing. Each year he said there is an increase in export demand from Japan, Korea and now China.
“As the population and middle class in China develops there is a greater desire for dairy products like cheese and ice cream,” Gauntt said. “The Chinese do not have the means to produce the forage crops that puts the milk in dairy tanks in the volume they need. They have come to the U.S. and Australia.”
The Chinese government has announced a breeding program to increase its dairy cattle industry, which had 9 million head before herds were culled because of strong beef demand and high meat prices. Gale said China is now importing large number of breeding cattle which require higher nutritional feeds.
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