By Peter Gillet
Australia has continued to ship increased volumes of oaten hay through summer and autumn 2015.
Demand for all grades is strong and it looks as though 2015 will have little or no export oaten hay being carried over into the new crop season.
Hay exports from Australia to Japan have averaged about 33,000 mt per month over the past 21 months. During December 2014 Australia exported 34,000 mt and again in January 2015. In February the monthly figure jumped to 37,000 mt and then in March 41,000 mt was exported. This March figure equates to an increase of 20 percent compared to the 21 month average. Most of this increase was due to the US west coast port dispute with Longshoremen. This was resolved in late February and March, and shipments from the US have increased substantially. Unfortunately for Australian exporters, large volumes of hay are now in stock in Japan. In order to move this hay, pricing may be discounted to avoid additional storage costs being incurred.
Increased volumes can also be seen in the South Korean figures, where Australian hay exports have averaged roughly 13,500 mt per month, but during February and March 2015 have totalled 17,000 mt per month respectively. This is an increase of about 21 percent and we have not seen these levels exported to South Korea since May 2014.
The situation in China is one of an immature market, facing different challenges compared to other more mature markets. While the weak Yen has affected high grade sales to Japan, it is the falling milk price that has been of most concern in China. This has been steadily decreasing since February 2014. There is no doubting the enormous growth in China already achieved in oaten hay markets over the past two years. Australia has gone from exporting 3,900 mt to China in July 2013 to a monthly high of 14,500 mt for August 2014. The monthly average volumes of oaten hay exported to China over the past couple of years is 9,200 mt, but it has been since March 2014 that we have really experienced a consistent jump in demand. Over this period the average is 11,500 mt per month. During February and March 2015 Australia has exported about 13,000 mt per month which is an increase of 30 percent on the average for the past couple of years. The fall in the value of the Australian dollar has assisted in Australia’s competiveness and allowed exporters to achieve increased sales while the milk price in China has been declining.
Many dairy companies in China process the liquid milk into milk powder. The decline in the milk price will see small farmers exiting the industry and the larger dairies expanding. Regardless of how you look at the numbers, there is no denying the Chinese hay market continues to grow for Australian oaten hay.
The Taiwanese market is smaller but stable, averaging about 3,500 mt per month. This market is focussed on quality, with volumes sometimes varying subject to high grade hay availability.
Overall Australia is in a very good position to capitalise on increasing hay demand from China and South Korea, with stable markets continuing in Japan and Taiwan.
The lower Australian dollar has also presented the opportunity to increase prices to farmers in Australia. This should continue this coming season and give a real alternative to harvesting oat crops for grain, even considering the increased oat grain prices.
With an El Nino in the wind, some areas are still looking for rain so good luck everyone.