WA EXPORT hay producers may be on the cusp of clinching a bigger share of the Saudi Arabian market.
Steve Woods from Emdavale Farms, Calingiri, left for Saudi Arabia with a group of delegates last week as part of the Australian Forage Group’s attempt to expand its market share in the country.
Mr Woods said he was hoping to meet with the Saudi royal family to convince them of the quality and availability of Australian hay products to meet the country’s growing need.
The Arab nation’s demand for top quality hay is about to surpass what the United States – its traditional supplier – is able to produce, which will drive up the price of hay and make it harder for US buyers to source the forage for their livestock.
Mr Woods said Australia’s exports to Saudi Arabia were minimal but they supplied the Saudi royal family’s stables.
“We are hoping that will expand,” Mr Woods said.
“With the increase in demand from Saudi Arabia there will be a shortfall of 1.3 million tonnes worldwide.”
His comments come from a report by Rabobank dairy analyst James Williamson, Foraging For Higher Prices.
In the report Mr Williamson said that Saudi Arabia was one of the top six importers of US hay exports and that its demand was driven by internal decisions about the country’s water supply.
He said China and Hong Kong, Taiwan, South Korea, the United Arab Emirates (UAE), and Saudi Arabia were responsible for buying 95 per cent of US hay exports.
These countries were increasing their import volumes and paying a premium for higher-quality hay, Mr Williamson said.
“Demand from these import nations will continue to increase during the next five years, especially exports to the Middle East, as Saudi Arabia phases out its hay production by 2019 in order to preserve its depleted water supply,” he said.
Mr Williamson said Saudi Arabia was implementing a water conservation program, which meant that forage production for animal consumption would be regulated and significantly reduced by 2019.
“If fully implemented, the United States Department of Agriculture estimates that Saudi Arabia will need 1.3mt of high quality hay annually,” Mr Williamson said.
“In 2016, the US supplied an estimated 65pc of total Saudi hay imports.”
During the first quarter of 2017 total US hay export shipments were up 18pc on the same period in 2016.
During this period exports to China increased by 47pc, South Korea 18pc and Saudi Arabia 62pc.
“To meet 65pc of Saudi’s estimated needs, the country will have to increase hay imports by 45pc year-on-year through 2019,” Mr Williamson said.
“Saudi companies are searching for and buying land around the world in an attempt to save their businesses and secure feed.
“Since 2014 (the Saudi company) Almarai has bought more than 14,000 acres in Arizona and Southern California to grow alfalfa and export to its dairies in Saudi Arabia.
“Saudi companies may look for long-term growing contracts or joint-venture opportunities to secure adequate feed.”
Besides the demand from importers the US has its own problems which are affecting the demand and prices of forage.
Mr Williamson said that Californian forage acreage had declined by 32 per cent since 2008 which was putting pressure on the rest of the Western Seven (W7) States of Arizona, Utah, Idaho, Nevada, Oregon and Washington and driving higher prices and demand.
He said with the decreasing amount of land for farming, local US buyers were being advised to look for alternative forage sources or pay higher prices to compete with the cashed up importers.
Mr Williamson said Saudi Arabia was offering an incentive of $US65 ($84) per tonne subsidy to importers of alfalfa which was roughly a 20pc discount on the first quarter free on board shipping price.
“This will more easily allow Saudi hay buyers to outbid US dairies for higher-quality W7 grown hay,” Mr Williamson said.
The Australian Forage Group (AFG), which has members from WA, South Australia, New South Wales and Victoria, reports that exports to Saudi Arabia have just begun.
The first shipment to the Arab State was in 2011, with a total of 777 tonnes that year.
That was followed by 444t in 2012 and 859t in 2013.
There was a gap of a couple of years before exports resumed in 2016 to 307t.
Since 2007, hay exports to Japan have been steady while South Korea has gone from 60,225t per year to 160,791t in 2016.
South Korea is estimated to import 257,544t in 2017.
China has gone from 417t in 2007 to 221,082t in 2016.
It is expected to import 263,472t this year.
Other growing import markets of Australian hay are Vietnam, Bahrain, the UAE and Taiwan.
AFG produces more than 500,000t of processed product annually in a variety of packaged formats which are sourced from Australian producers.
The group has collectively more than 100 years’ growing, harvesting, processing and exporting experience.
As part owners in Hay Australia – which was established about 12 years ago – the Woods family is an AFG shareholder.
They have about 2000ha on which they produce about 9t per hectare of oaten hay for export as part of their farming practice in Calingiri – along with straw, canola, wheat and barley crops.
