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Alfalfa prices reach five-year high, pushed by strong demand

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Prices for alfalfa hay have been driven up to their highest levels in almost five years amid strong domestic and export demand.

 

A report from the US Department of Agriculture notes that the price of the crop, at $199 per short ton in May, has reached its highest level since August 2014 - when prices reached $216 per short ton.

 

While that historic price increase was attributed to inflation, exports are being driven by countries such as Japan, South Korea and the United Arab Emirates, as well as China.

 

The USDA explained: "Demand ... is primarily driven by growth in beef, mutton and dairy sectors in relatively high-income countries without adequate cropland for forage crops."

 

Figures from the USDA show around 56.63m short tons of the crop were produced in the US in 2018 - about 45% of the country’s hay output.

 

Saudi Arabia’s decision to lift restrictions on planting wheat could also boost imports from the likes of the US, says the USDA.

 

Prices supported

 

Observers note that the price could well be supported as yields are likely to be reduced as result of one of the wettest growing seasons since records began as well as continued demand from China.

 

Research by the USDA’s Beijing bureau in April also highlighted that while trade tariffs imposed by China as part of the ongoing trade war, "US alfalfa is expected to remain an important component of rations for China’s animal and dairy industries."

 

Alfalfa farmers also benefit from US President Donald Trump’s $16bn package of measures to support products affected by the economic sanctions.

 

While China has grasslands of more than 400m hectares, which is used to support about 70m beef cattle, 13m dairy cattle and more than 300m sheep and goats, according to 2016 estimates, overgrazing has "degraded" a large proportion, and an estimated 30% that are "seriously degraded".

 

China’s insatiable appetite

 

Although the country is making "serious efforts", the report notes that China will continue to import high-quality alfalfa from the U.S to support its growing dairy farms.

 

Indeed, the Chinese government estimate it will require 6.9m short tons of the crop - up from 3.9m tons in 2017 - with 1.5m short tons coming from imports.

 

While China has set targets to have domestic alfalfa production supply 80% of its needs, the bureau said: "Experts are suspicious" because of the ecological challenges and the importance of protecting natural grassland.

 

The bureau concluded: "US alfalfa exports to China should increase if additional tariffs are removed."

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