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They Need Hay — And They Can Pay

“Up until now, they weren’t really tracking their irrigation use, but now they are really cracking down, given what their water supply situation is going to be like over the coming decades.”

– glenn friesen

New markets for hay in the oil-rich Middle East could present a golden opportunity for Manitoba forage growers – if the price rises enough to make shipping it there worthwhile.

With the slumping economy and a gradual decline in the U. S. dollar making the traditional market for hay less attractive, the forage industry might consider diversifying its customer base to include other export markets further afield, according to Glenn Friesen, a business development specialist with the provincial Agriculture Department.

“There’s no question, that’s kind of where we are shifting. There’s a large North American push away from traditional markets,” Friesen told a Manitoba Hay Day workshop here last week.

The top forage importers in the world are Japan, South Korea and the United Arab Emirates (UAE).

Imports by Pacific Rim countries have fallen some 33 per cent in recent years, but at the same time, UAE demand has soared by 300 per cent.

The UAE is best known for Dubai, the largest city in the oil-rich union of seven independent provinces, where up until recently it seemed as though anything was possible, even an indoor ski hill in one of the world’s hottest deserts.

In 2003, the UAE grew 200,000 tonnes of “wet” alfalfa to feed its small, heavily subsidized but significant livestock, dairy and equine sector.

Farm production accounts for 85 per cent of their water use, and as their groundwater supplies dry up, they will need a lot more imported food and feed, he said.

“Up until now, they weren’t really tracking their irrigation use, but now they are really cracking down, given what their water supply situation is going to be like over the coming decades,” said Friesen, adding that at a cost of 60 cents per litre, large-scale desalination plants will likely never be able to support agriculture to any meaningful degree.

As a result, the UAE government has been issuing tenders for hay shipments through the companies Jenaan and Al Dharra, owned by the royal families. In 2007, they bought 600,000 tonnes of alfalfa, mainly from Spain and the U. S.

A tonne of hay in the UAE sold at retail for $416 in 2009, compared to $314 in the U. S.

For 2010-11, the UAE plans to cease all irrigation subsidies, and import all of its forage needs to the tune of 1.2 million tonnes.

“That opens up a whole new ball game for people growing mixed species,” said Friesen. “We figure there won’t be any designation about percentage of alfalfa because it would be too hard to manage that.”

Saudi Arabia could be another important potential market for anywhere from two million to five million tonnes of forage, as it phases out its domestic agriculture production, also due to an alarming decline in nonrenewable water supplies.

Other markets might open up in Kuwait, Oman, Qatar and Bahrain in the future, he added.

The trick is getting it there. Ocean freight has been wildly volatile due to the financial crisis, plunging from $85/ tonne amid the commodity boom of mid-2008 down to just $15/tonne in early 2009.

Friesen will go along on a trade mission funded in part by the Canadian Forage and Grassland Association that will head to Dubai and Riyadh, Saudi Arabia next month in the hopes of drumming up business for Canadian forage growers.

Currently, superior shipping infrastructure in the U. S. gives growers there a cost advantage, but there is a possibility of using the Port of Churchill in the future. Also, a reputation for higher quality could pay off in long-term returns.

“We know from multiple sources that politically speaking, Canada is preferred as a supplier over the U. S,” he said. [email protected]

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