Sure, it’s a lousy pun, but it’s also true. There’s plenty of “hay” to be made in North American forage markets in 2012. In fact, there’s even lots of the green stuff to be made selling hay to the owners of Ontario’s two million cattle and horses.
So why look overseas? Because the prospects might be even better, as a small but growing number of Ontario farmers can attest.
Fritz Trauttmansdorff, who farms near Jerseyville, Ont. has sold hay into England and Ireland. “There’s always something that’s in short supply,” Trauttmansdorff says.
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That doesn’t mean it’s a simple market to serve. In fact, says Trauttmansdorff, it really isn’t a single market at all. “The market is so fragmented that a producer or a group needs to pick its spot on what they want to supply,” he says.
Nor is it a market where it’s easy to score a quick sale and walk away with a bulging wallet. It takes skill, Trauttmansdorff has learned… or actually, it takes a number of skills.
The conditions have to be right to do any kind of exporting, he says. Just because the market opportunity is present, doesn’t mean it is wide open to everyone.
For instance, growers need to know their hay’s quality, and they need to be able to figure out who needs that exact hay. “Hay isn’t like No. 2 corn,” Trauttmansdorf says. “I don’t think you can generalize it that way, because certain customers need certain things in certain years.”
Then come all the complexities of the marketing channel. One example Trauttmansdorf cites is shipping costs. He has seen shipping rates from Canada to England that are cheaper than trucking costs from Spain to England.
“That’s your competition, but some years, we can get cheap ocean freight,” he says. “And other years, freight is a little hard to get. And then you have currency exchanges or other factors that play into it.”
Few things on the export market are simple. Even fewer can be taken for granted. Demand may be high, but trade barriers and protectionism can be even higher. For instance, in the case of countries including China and Russia, there have been instances where loads have been held on the dock while buyers and sellers hammered out the particulars of how to test the hay for diseases in a load of hay.
Clearly, that isn’t the kind of discussion you want to go into without knowing your stuff, especially since buyers may not have access to technology that is as sound or as advanced as testing facilities here in North America, meaning that even where there is all the goodwill in the world, there can still be false positivies to deal with.
Are the buyers in these scenarios simply trying to cut their costs? Maybe. Are they being protectionist? Possibly.
Is it enough of an impediment to leave some growers and exporters disillusioned, to the point of staying home? Perhaps.
Challenges versus opportunities
Even so, for Don Rowntree, some international markets are getting too large and potentially too lucrative to ignore. Rowntree is a grower and exporter of hay from his farming operation near Georgetown, Ont. His expertise and perspective on overseas markets is fortified by his 17 years’ experience in Moscow where he worked in international cattle exports, as well as additional experience with China.
Rowntree is all too familiar with the hurdles that buyers can put in the way of farmers who want to go after these export opportunities.
“Getting on to these countries, for some people, it would be a monster of a project, and it can be, don’t get me wrong,” say Rowntree. “When you make commitments on the international market, or you haven’t got your money straightened away, it can be a big problem.”
Yet Rowntree is equally familiar with what he considers a major opportunity for Ontario hay producers.
Specifically, Rowntree is referring to the Middle East, a region that is getting onto the radar for many countries, including Canada and the U.S. Too often, the perception is that the Middle East is vast, arid and not a particularly strong player in agricultural production. Instead, the real news is that some countries, including the United Arab Emirates (UAE) and Saudi Arabia, are changing their water or irrigation designations in ways that have major impact on their hay markets.
“They’re running out of water… they’re going to see about importing corn, wheat, soybeans and hay instead of trying to grow it there,” says Rowntree, adding that there have been several delegations to the region in the past few years. “That’s why the interest is starting to spike for compressed hay, cubes and pellets. But don’t think that the U.S. and other countries aren’t looking strongly at it also.”
Rowntree sees it is as a very large opportunity, but he also sees it as one that comes with the proviso that growers hit all of the parameters, ranging from quality to volumes to consistency.
Add to that the reality that growers in Quebec and Ontario are competing against forage growers in the U.S who often have irrigation and can easily produce quality hay with 20 per cent crude protein and relative feed values (RFV) of 180 and some as high as 200.
The good news from Rowntree’s perspective is that even if U.S. growers keep Canada out of the Middle East market, there will be additional opportunities to fill any shortfall in the U.S. that might result.
From a government perspective, there has been intense interest in the Middle East for more than two years. Athar Shah, business development consultant for the Ontario agriculture ministry, is a strong advocate of addressing market demands from the Middle East. Although his specialty is in bakery, cereals and milling, he agrees that water scarcity in the region could translate into export opportunities for Canadian forage growers. Current estimates for the total forage requirements in the Middle East could be as much as a million tonnes per year.
Indeed, just last year a major forage distributor from the Middle East travelled to Canada and spoke with Ontario Forage Council representatives, Shah points opuit.
“Middle East companies are willing to invest in forages to secure their supplies,” says Shah, but he also notes that the same trends apply, including the need to develop relationships between buyers and farmers. In fact, it’s similar to the identity-preservation soybean market between Japanese buyers and Canadian growers. “Globally,” Shah says, “everyone is value conscious, and can negotiate the best possible deals.”
In fact, the Ontario Forage Council (OFC) is active in determining potential markets for the Middle East. In 2009, the OFC was involved in a trade mission to the region, to investigate some of the market potential. A year later, a research project was initiated to study moisture levels in Ontario forage, and the findings have been positive; levels were under the 12 to 15 per cent range. That means shipping is a far more viable option, with further study underway.
More research
Other initiatives to help build hay exports include one by the Ontario Hay Marketing Forum, a group of farmers and industry stakeholders working to address new and existing markets for cashcrop hay. This group is also working with the Canadian Forage and Grassland Association, attempting to identify local and continental opportunities as well as those in the Middle East and China.
“They have looked at the feasibility of supplying these markets and identified the barriers that need to be addressed,” says Joan McKinlay, communications assistant with the OFC. “They are currently looking at the feasibility of double compaction of hay in Ontario for export. The availability of containers for shipping, country protocols and harbour charges have also been examined. Protocols must be set up with countries and importers so that the product is not rejected at the point of delivery.”
Reducing transportation costs and establishing consistency of supply are also critical, McKinlay says, and compaction is another key issue.
“For overseas markets, you need to work with containers, and with containers, you need to max them out for weight, and you can’t do that with a field press,” Trauttmansdorf says. “You need a stationary press that is capable of doing that so you can get your 56,000 maximum pounds into a container.”
If the OFC feasibility study determines the need for a stationary press, then work also has to be done to establish the infrastructure needed to ensure consistency and volume.
“The whole business has to build the infrastructure, and contracting growers to be suppliers,” adds Trauttmansdorff. “You can’t just buy hay as it comes in. It needs to be grown in a certain way, harvested in a certain way, stored and delivered — basically, you need to create a whole contractual infrastructure to make that grow.”
To that end, Rowntree would like to see a training or education program to help growers understand the various quality and volume parameters that they would have to meet for these export markets. That training would include segments on the need for proper storage, for instance, with skids on the barn floor to boost air flow around the stacked bales.
“We have to educate the farmer,” says Rowntree, using the catch phrase “green on four sides” as one example of a quality parameter demanded by international buyers. “We need to help farmers understand protein and relative feed values for these animals.”
In the meantime, the OFC research into export markets and building the necessary infrastructure continues. For some, the results can’t come fast enough, but the end result should be the same.
“Just as cash crop prices seem to have reached a new plateau, we believe that hay prices have as well,” says McKinlay. “These higher prices will make it more lucrative to keep hay in the rotation.” CG