President Donald Trump’s decision to halt U.S. participation of the Trans-Pacific Partnership did not have a big impact on the hay industry, said Bob Haberman, part-owner and operator of Number 9 Trading Company, explaining forage exports were not high on the list of trade priorities. Other market forces will have a bigger impact on the hay industry, such as the Hanjin shipping line bankruptcy last year.
“TPP wasn’t going to be the penicillin of increasing a lot of trade because nobody knew what was going to be in it. We have more issues at home that need to be resolved,” Haberman said in an interview with the Daily Record.
Hay exporters are facing problems with getting their product to customers in a reliable manner, he said. Shipments being delayed due to road closures at Snoqualmie Pass from weather conditions, backed up freight lines at the Port of Seattle and recently the Hanjin bankruptcy. The South Korean shipping line’s troubles threw ports and retailers around the world into confusion.
Some products on Hanjin’s ships failed to reach customers until January of this year, Haberman said. Other carriers have raised their rates a bit, but so far customers have absorbed that cost.
“What I’m seeing that since Hanjin went bankrupt there is limited space for cargo on steamships. If we don’t make a booking due to the pass being closed and the container is not getting over there and we have to roll that booking on the steamships, it sometimes has to roll out in three to four weeks,” Haberman said.
John Szczepanski, director of the U.S. Forage Export Council, said while there is still demand for good quality hay, profit margins in the industry are razor thin. He spoke at an economic conference at Central Washington University this week.
“Hay is a high volume, but low margin product. It depends a lot on our ability to get our product to our customer efficiently and cheaply to make money in this industry,” Szczepanski said.
Markets like China, Japan and Korea are using U.S. hay to feed dairy cows, he said.
The cows need hay on a daily basis and so farmers need a reliable source for their feed. The port slowdown in 2014 and temporary road closures at Snoqualmie Pass have made customers anxious.
“We’re selling to dairy farmers whose cows are eating the hay on a daily basis. A dairy farmer can’t go up to his cows and say, “Guess what the American product isn’t going to show up this week. We’ll make do,” Szczepanski said.
The hay market is changing, he said. Japan and South Korea used to be the biggest importers of forage crops. The two countries now make up less than 50 percent of the market while China’s imports are rising.
A lot of the demand is driven by weather conditions and natural disasters. In 2011, after the Fukushima earthquake in Japan, the country increased its imports of forage crops. South Korea’s government imports hay on a quota system based on its own production. This year the country had bad weather and couldn’t grow much of its own supply.
“The quota system has been adjusted very much in our favor. Because they’re just not able to supply enough of their own product this year,” Szczepanski said.
Imports of hay in Japan are down, he said. Japanese farmers are getting older and selling their dairy cows. Seventy-four percent of Japanese farmers are over the age of 65 years old. The Japanese government is also offering subsidizes to farmers who grow their own forage instead of buying U.S. hay.
“That’s kind of a trade issue. But in terms of trade issues that is probably 150th on the list,” Szczepanski said.
In recent years China has become a premier export market, he said. The country has increased its dairy production and dairy farms are being built next to cities like Shanghai and Beijing. But the country’s grasslands are in Western China and its infrastructure makes transporting hay internally cost prohibitive.
“It is actually cheaper in China to import hay from the United States than to try and grow it,” Szczepanski said.
The U.S. has an opportunity to take advantage of the growing hay market right now, but it could be hurt if the federal government places tariffs on imports.
“Tariffs are not going to help us out of an economic malaise. (Instead) it could be extenuated by a trade war where everybody loses,” he said.
Tara Mattina, communications director with the Northwest Seaport Alliance, said in an interview the collapse of Hanjin in October created confusion for exporters and shipping lines. The Seaport Alliance is a partnership involving the ports of Seattle and Tacoma.
“There was kind of a scramble,” Mattina said. “Some of the ships were anchored offshore for a while. There were some terminals that said they wanted to be paid up front. They wanted to be certain they were going to get paid. So there were some delays.”
Those delays have since been resolved and other shipping lines have picked up the cargo and contracts that Hanjin dropped, she said. In 2016 the ports of Tacoma and Seattle had a great year with increases in both imports and exports. The port has more shipping containers moving through it than it has had for several years.
“We’re still seeing pretty stable cargo numbers in fact we’re seeing increases in our cargo volumes. There were probably other shipping lines that stepped in and are carrying more cargo than before Hanjin went bankrupt, but in general our shipping numbers are stable and in fact are growing,” Mattina said.