| | Overview | History | Product use | Marketing timothy hay | International markets | Market access | Residual markets | Summary | Return to Special Commodity Marketing page
Overview
Worldwide, the term "compressed hay" refers to various forage products compressed into tightly bound, high density, low moisture bales. Compressed products marketed around the world include grass-seed straw aftermath, alfalfa hay, sudangrass/bermudagrass from the U.S. and oats green-feed from Australia. However, in Canada, the term “compressed hay” is almost exclusively timothy hay.
Timothy forage grows extremely well under Canadian growing conditions and is in demand as roughage in Japan and other Pacific Rim countries. Timothy, native to Japan's Hakkaido region, is used as long-straw fiber in the diets of dairy and beef cattle there. Timothy is also used in the horse industry in the Asian markets. Canadian timothy is recognized in the Asian markets as both a palatable and nutritious source of fiber. The export market for baled forage has expanded rapidly in Western Canada, with producers and processors working hard to keep pace with the increase in world markets.
Timothy hay field
History
Export shipments from the western provinces have increased from a trial shipment of 17 tonnes in 1981 to over 300,000 tonnes in 2003-04. Japan consistently imports more than 80% of that total. Japan has easily become Canada's largest customer. Canadian production continues to grow, despite drought on the prairies in 2001 and 2002. Production has almost doubled from 1998 to 2005. Canadian compressed-bale hay exports over the past seven years has averaged over $78 million dollars annually.
Table 1. Canadian Exports of Processed forages - Calendar Year (tonnes)
| Product | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 |
| Alfalfa meal and pellets, dehydrated | 158,011 | 212,859 | 186,609 | 286,030 | 139,328 | 96,397 | 185,250 | 128,171 |
| Alfalfa meal and pellets, sun-cured | 35,254 | 33,600 | 52,981 | 35,061 | 7,849 | 9,338 | 43,150 | 42,976 |
| Alfalfa meal and pellets, nes | 26,880 | 28,120 | 34,707 | 63,105 | 11,295 | 15,084 | 12,049 | 12,040 |
| Alfalfa in cubes (dehydrated) | 92,668 | 83,268 | 114,707 | 93,756 | 61,444 | 64,795 | 66,163 | 58,176 |
| Hay, timothy | 146,973 | 158,730 | 214,532 | 275,660 | 281,214 | 212,902 | 323,814 | 317,180 |
| Total: Processed forages | 498,516 | 577,171 | 662,725 | 795,650 | 519,052 | 398,516 | 630,426 | 558,543 |
Note: Western Canadian drought in 2001 and 2002
Table 2. Value of Canadian Exported Processed Timothy
Year | Exports – tonne | Value
(Millions of CDN $) | Avg $/tonne
(July - June) |
98-99 | 163,802 | 52.56 | 320.88 |
99-00 | 182,860 | 54.07 | 295.67 |
00-01 | 250,197 | 80.06 | 320.00 |
01-02 | 299,044 | 104.92 | 350.85 |
02-03 | 199,373 | 75.50 | 378.69 |
03-04 | 309,619 | 97.94 | 316.33 |
04-05 | 286,885 | 86.06 | 299.97 |
Table 3. Canadian Processed Hay* Exports by Country (tonnes)
Year | Japan | China | United States | Korea,
South | Taiwan | Others -
12 countries | Total |
2000-01 | 239,207 | 159 | 116,713 | 60,916 | 34,234 | 1,955 | 459,557 |
2001-02 | 215,013 | 1,679 | 56,113 | 16,642 | 20,761 | 343 | 310,629 |
2002-03 | 208,643 | - | 45,905 | 5,312 | 16,728 | 1,641 | 279,439 |
2003-04 | 458,909 | - | 47,456 | 16,939 | 18,125 | 3,879 | 546,506 |
2004-05 | 432,104 | 60,120 | 51,985 | 31,447 | 18,162 | 2,482 | 596,480 |
*Note: “Processed Hay” includes compressed timothy as well as processed alfalfa products.
The Western Canadian compressed hay industry has been changing over the past few years, with new plants entering the scene while others have ceased operations. At time of writing (fall 2006), there are eight plants in operation in Alberta, three in Saskatchewan, three in Manitoba, and one company operating in the Maritimes. Operation sizes vary.
Product Use
Japan imports baled forage to supplement and replace locally grown roughage in the rations of dairy and beef cattle and horses. Timothy hay forage accounts for just 11% of Japan's baled hay imports. Timothy is, however, grown extensively on the island of Hokaido, Japan's major dairy-producing region. Hokaido produces about 400,000 tonnes of timothy a year.
Timothy hay being double compressed
This local Japanese production of timothy bodes well for exporting nations, including Canada, for two reasons.
- Local Japanese production of timothy forage makes it a known commodity, and
- Many Japanese dairy rations are formulated with timothy hay in mind.
Continued growing awareness of the quality of timothy hay is likely to fuel a shift to timothy, and away from less-palatable, native grown forages, such as Bermuda grass, sorghum-sudan grass and rice straw.
Marketing Timothy Hay
Timothy growers marketing perspective
- The production of compressed timothy for the export marketplace can be very lucrative, however, many details must be considered.
- Processors require solid stands, with no contaminates of other plant species
- Weathering of product quickly down-grades the product
- Many foreign buyers still determine product quality visually. If samples from your delivered hay does not meet this visual inspection, it may be downgraded
- A simple rain shower at an inopportune time can result in discounts.
- Cost and return budget information is done annually, for selected Alberta regions.
Timothy processors marketing perspective
Compressed hay, being sold into an international marketplace, comes with more expenses, other marketing considerations, and therefore, more risk.
- Additional costs of selling into an international market including brokerage fees, container ocean freight and rail/container freight costs, export insurance, rejection insurance, port charges. Typically, a Canadian exporter may be paying ocean and rail freight of $95 to$100/tonne, broker fees of $6 to 10/tonne, export and rejection insurance of $5 to $8/tonne, and a port charge, usually most built into ocean freight bill.
- Cost of setting up processing facilities and storage. Foreign customers require compressed hay year round, therefore, local processors must store the product in a dry, clean environment until processed and shipped.
International Markets
Canada's main timothy export market is Japan (80% of exports), with additional sales going to the USA and Korea, (10% and 6% of total exports). Taiwan, the Middle East, and Europe are secondary markets, but have shown potential for expansion.
The Asian market is driven by changes in consumer eating habits. Brought about in part by higher living standards, the changes have led to an increased consumption of milk, milk products and red meat. This has encouraged a significant increase in dairy and beef cattle numbers and boosted demand for high-quality, long fibre forage products. Forages provide fibre for proper rumen function. With a limited land base, smaller Asian countries must import large quantities of forage to supplement local production.
Baled timothy, ready to be dried down and compressed (processed)
1.Market size
Japan is the world's largest feedstuff importer, and provides the largest market for Canadian baled forage products. Overall, Japan imports over 30 million tonnes of compound feeds and feed ingredients a year. Of this total, more than three million tonnes are forages. Some 2 million tonnes of those forages are baled long- fibre forages.
Trade liberalization, export protocols, increased demand for fresh milk, growing acceptance for the substitution of other forage products for rice straw, and a steady expansion of the race horse industry are key factors that support the continued growth of Japanese demand for baled forage.
Table 4. Japanese Compressed Hay Imports (tonnes)
Year | USA | CHINA | AUSTRALIA | CANADA | OTHERS | TOTAL |
1996 | 1,223,485 | 58,867 | 85,461 | 89,309 | 4,771 | 1,461,893 |
1997 | 1,462,265 | 69,228 | 115,081 | 104,906 | 5,529 | 1,757,009 |
1998 | 1,240,617 | 61,167 | 113,913 | 138,716 | 3,903 | 1,558,316 |
1999 | 1,373,676 | 56,752 | 158,911 | 149,502 | 7,021 | 1,745,862 |
2000 | 1,423,459 | 15,238 | 182,984 | 184,283 | 13,846 | 1,819,810 |
2001 | 1,421,167 | 520 | 194,946 | 214,316 | 11,904 | 1,842,853 |
2002 | 1,490,607 | 616 | 296,778 | 233,298 | 8,468 | 2,029,767 |
2003 | 1,717,179 | 5,042 | 362,038 | 198,501 | 9,661 | 2,292,421 |
2004 | 1,520,704 | 5,081 | 429,941 | 298,450 | 8,598 | 2,262,774 |
2005 | 1,565,432 | 3,142 | 490,615 | 252,774 | 8,457 | 2,320,420 |
In addition to Japan, South Korea has once again become a buyer of Canadian processed timothy. Canada shipped over 50,000 MT to South Korea in 2001, but exports dwindled since. However, 2005 saw exports climb back up to just under 50,000 MT, following years that saw exports fall to 6,000 MT (2002), 8,000 MT (2003), and 21,000 (2004)
2.The competition
Three countries compete for the Japanese baled forage market. The USA is by far the largest supplier, with Australia and Canada following suit.
In 2005, Japan imported 1,565,432 tonnes of compressed hay from the U.S., 69.1per cent of its total baled hay imports. Australia exported 490,615 tonnes to Japan at the same time. Canadian exports to Japan in 2005 were 252,774 tonnes, 10.8 per cent of Japanese imports. U.S. baled hay exports are mainly compressed forage grass aftermath from ryegrass and tall fescue straw, while Australian baled hay products are primarily compressed green feed oats. Australian exports to Japan have increased substantially over the past five years. The Australian industry has grown and ocean freight rates give Australia a freight advantage. China's presence in Japan has really dwindled since the late 1990's.
The Japanese baled hay market continues to expand. It was up 2.5 per cent from 2004 to 2005, but up 58 per cent over the past 10 years. Canadian baled hay exports continue to rise, as well, although 2005 baled hay exports going into Japan of 252,000 tonnes were down slightly from the record of 298,000 tonnes of exports in 2004.
Market Access
Timothy hay exports markets are driven by 4 key considerations: foreign customers' preference, quality specifications, product form and export requirements.
1. The customer
To the grower, the densified hay processor is the producer's customer. However, the real customer of baled hay is the foreign end user, the export market. To supply hay to the international market, Canadian growers should first contact a number of hay processors, thoroughly familiarize themselves with what the market demands, and then choose a processor to do business with.
Different processors may set different requirements and standards for raw material, based on market opportunities and their end-user preference. Contract options and services may also vary between processors.
Densified hay processors secure a supply of hay through various means. Some rely solely on spot market purchases. Others contract hay production from producers for three- to four-year periods at fixed or annually-adjusted prices. Still other processors go a step further and perform harvesting and storage functions on their contracted acres. With dryland yields averaging 1.7 to 2.5 tonnes/acre and 4.0 tonnes/acre on irrigation, 130,000 to 170,000 acres of clean, solid-stand timothy hay fields are required annually to meet market demand.
All Canadian exports are shipped via container.
2. Product quality
The high cost of transportation to reach distant markets drives processors' demands for high quality forages. Shipping low quality roughages at high freight rates is economically unsound. Quality timothy hay, to the Japanese end user, means long, course stems with long heads. The market wants leafy stems with a good green color and a minimum of brown leaves. The product must be free of mold, weeds, soil, Agropyron (quackgrass) and Hordium (barley) plant species, and other contaminants.
Stand purity is also important, although some processors have markets for different mixtures of hay, timothy straw, and mature off-colored hay. This information is best obtained from processors.
The moisture content must be below 12 percent. Low moisture eliminates the chance of mold and moisture damage during transport and storage in hot, humid climates. The market does not set crude protein or fibre standards. Buyers rely on subjective evaluations of visual appearance, color and smell, etc. This, too, will vary annually, especially in wet years when good quality roughage may be in short supply. At present, no standard exists for compressed timothy, although studies are currently under way to determine a standard acceptable to both industry and buyers.
3. Product form
Baled forage destined for the export market is usually densified or compressed which reduces shipping costs.
The hay is typically compressed into a 14" X 18" X 18" bale weighing approximately 80 lbs. It is banded with three to four poly straps. The densified bales are mechanically packed into 40-ft containers, transported by truck to an inland container yard and then by rail to a Canadian port. From there they are loaded on ocean-going container ships bound for offshore markets. The size and shape of bales demanded from the producer varies between processors.
For the most part, the standard small square bales are preferred. Some processors can re-bale large round or large square bales. Bales are typically all reprocessed and compressed. Bales are broken open, dryed down mechanically to 10 to 12 percent moisture, compressed and baled, poly wrapped, then loaded into containers. Samples from each lot are kept. Buyers will view individual lots, bidding on the hay based on color, texture, contamination, and other factors.
Wrapped compressed bales, waiting to be loaded into a container for shipping
Some Canadian companies have been investigating providing Japanese customers with Total Mixed Rations, which would result in sending a much larger compressed bale overseas, with timothy roughage in the bale and other feedstuffs to make the bale the only feed the animal would require. Bales could be as large as one tonne. The use of these complete ration bales is being investigated since many Japanese farms are becoming integrated and larger in size.
4. Export requirements
Phytosanitary Certification: The Japanese Ministry Of Agriculture Forestry and Fisheries (MAFF) prohibits the importation of soil or plant species that could potentially be infested with Hessian fly larva or eggs. The Hessian fly is found throughout Western Canada and tends to infest wheat, barley, rye and other wheatgrass species, including quackgrass (Agropyron/Hordium) plant species. Development of a protocol using compression, to kill any Hessian fly larva and eggs present in the straw, is presently underway.
Canada has successfully negotiated a visual inspection protocol with Japan. The protocol allows shipments of baled forage to be inspected by a Canadian Food Inspection Agency (CFIA) inspector or an inspector designated by CFIA. If certified free from prohibited material, a Phytosanitary certificate is issued, and the shipment will be allowed access to Japan. However, Japanese inspectors will also visually inspect all shipments and can refuse entry if they discover any prohibited material. Entry refusal initiates a trace-back protocol established in Canada.
Work on a heat treatment protocol with Japan is also underway. Regardless of the protocols, it is still in the producer's best financial interest to produce quality product with high feeding quality and free of Agropyron or Hordium contaminants.
Densified hay processors may accept Agropyron-contaminated hay for sale to other markets, but only at much lower prices.
One major pricing factor affecting export sales of compressed timothy is the risk of rejection. Rejected lots, landed overseas, results in great expense, considering ocean freight has already been paid. More freight may be added to ship to a secondary buyer, as well as potential shipping demurrage, discounts, etc.
Residual Markets
Baled forage that does not meet the strict Japanese standards may be sold into other export markets including Korea and Taiwan. Processors may also be able to market hay in the single-compressed form on the domestic market or into the USA. Europe, the Caribbean and the Middle East also have different requirements for baled forage and may accept a variety of baled forage products.
Summary
The potential for increasing Canadian exports exists especially with Japanese usage of compressed forages continuing to rise annually. However, Canadian market share has to be maintained or increased since our competitors continue to sell product into the Asian marketplace. Canadian producers must continue to produce a high-quality forage meeting our export customers’ demands. A Canadian product, consistent in quality, will have to be maintained to keep and expand our markets. |
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