By DAN WHEAT
PASCO, Wash. -- A major hay exporter is shaking up the industry in the Pacific Northwest by paying growers for hay within two days of delivery and opening a mammoth hay storage facility.
Zen-Noh Hay Inc. hosted about 250 hay growers, brokers, transportation providers, community leaders and dignitaries from Japan at a prime-rib dinner and grand reopening of its Port of Pasco plant on May 2.
Hitomi Narikiyo, president and CEO of Zen-Noh -- Japan's National Federation of Agricultural Cooperative Associations -- and John Williams, president and CEO of Zen-Noh Hay and Zen-Noh Grain, spoke before guests toured the facility. Port of Pasco commissioners and Pasco Mayor Matt Watkins joined Narikiyo and Williams in a ceremonial ribbon-cutting of two new buildings totaling 345,150 square feet and costing almost $4.6 million.
Established in Pasco in 1994, Zen-Noh Hay is a wholly owned subsidiary of Zen-Noh Grain Corp. of Louisiana, which is primarily owned by Zen-Noh and the Norinchukin Bank of Japan.
Noting Zen-Noh Hay added a new hay press in 2009 and improved timothy hay fumigation in 2011, Narikiyo said all of the improvements enable it to improve productivity, production cost and price competitiveness.
"That means Zen-Noh Hay is supposed to get powerful, dramatically," he said, speaking through an interpreter.
Zen-Noh represents 10 percent of Japan's 2.4 million-ton annual forage imports and now is challenged to reach 2 million tons, Narikiyo said.
"Demand for imported forage has been increasing because of the trouble in the nuclear power plant in Fukushima," he said. "The Trans-Pacific Partnership negotiation might affect our business strategy, but I believe this investment is appropriate considering the current circumstances of food supply and demand in the world."
Construction of the new warehouses began last fall and was just completed. There are two, fully-enclosed metal buildings capable of storing 50,000 tons of baled hay. One building is 234 by 350 feet and the other is 234 by 1,125 feet. They are the culmination of $12 million in investments over the last three years, a Zen-Noh Hay vice president said. There are seven other storage and production buildings.
It is one of the largest hay storage and press facilities on the West Coast, said Owen Schwendiman, the operations manager.
The facility replaces outside hay storage under tarps that the company spent more than $600,000 a year on. The buildings better protect hay from weather and increase its quality when it arrives in Japan. About 90 percent of the 120,000 tons of the hay goes to Zen-Noh of Japan for the beef and dairy industries, Schwendiman said. What doesn't meet Japanese standards is sold to South Korea, he said.
But a potential industry game changer is the company's new program to pay growers electronically within two business days of their hay arriving at the plant.
"Hay exporters and dairies have a long history of stringing out deliveries and payments to growers. We hope to change that," said Matt Hirai, the company's purchasing manager.
Zen-Noh Hay has a reputation for reliable payments but paying faster removes the grower as the cash carrier for the exporter, he said.
"This is set up to entice growers to sell to Zen-Noh Hay. We want to be the place growers want to sell to," Hirai said. "No one else in the industry pays that fast. No one is faster than two weeks and most are 30 or 60 to 90 days."
Zen-Noh Hay does a lot of down payments, and the industry norm is 50 to 75 percent down when contracts are signed at the start and during the growing season, he said.
When told of Zen-Noh Hay's new program, Mark Anderson, president and CEO of Anderson Hay and Grain Co., Ellensburg, Wash., said it is "very aggressive" and "will put a lot of pressure on the industry" for cash flow to secure hay.
"There are a lot of different payment terms in the industry. It will put a lot of pressure on people who work off growers' money," Anderson said.
Hirai said the new payment program will be a game changer in the area in which the company buys hay. It gets 80 to 85 percent of its hay in the Columbia Basin within 90 miles of Pasco, he said. Some is purchased in Oregon and Idaho and, depending on weather damage and the availability of premium export hay, buying can stretch into Alberta, Montana and northern Utah, he said.
The company buys from 40 to 60 growers, he said.
Nick Gombos, supply chain manager of ACX Pacific Northwest, Bakersfield, Calif., said, "Wow" when told of the quick payment but said he doesn't see it as a big game changer. ACX and a couple other companies track purchases online and pay within a week, he said.
It probably will pressure some exporters and dairies but a lot of farmers prefer later payments for tax purposes, Gombos said.
"Commodity prices are still high and with historic profits. It's probably not as big a deal buster as several years ago when prices were low and farmers needed cash," he said.
Hirai said some companies pay on the same day in special circumstances but no one broadcasts that they do so.
"We're letting everyone know that if they sign up for it we will pay," he said. "No one else is doing that."
Growers who prefer later payments still will be able to get that, he said.
Chep Gauntt, a Kennewick grower and a past president of the Washington State Hay Growers Association, said quick payment "absolutely" pressures other exporters and possibly dairies and allows Zen-Noh Hay to get the cream of the crop.
"They've always been competitive with their prices and this could be a game changer in the standpoint that they will suck in more premium growers," he said.
Gauntt said he's had excellent dealings with Zen-Noh Hay since 1997, that it keeps exceptional records and always pays when it says it will.
Brad Higgins, a Lewiston, Idaho, grower in his third year of selling to Zen-Noh Hay, said he's impressed with its professionalism and that it demands quality that he likes to be associated with. He called the quick payment program "awesome" and "leading edge" that growers appreciate.
ACX and Anderson Hay have increased their buying and shipping from the Pacific Southwest in the last couple of years because ocean shipping can be less than one-third the cost out of Los Angeles ports compared with Seattle and Tacoma.
All Zen-Noh hay is shipped from Seattle and Tacoma. Japanese buyers are willing to pay higher costs because Columbia Basin hay is the best quality, Hirai said.
Japan is more focused on quality while China and the Middle East look more for the best price, he said.
Beside being competitive, quick payment and increased warehouse storage eliminates liability issues that can arise with growers if hay is damaged or destroyed by weather or fire while being stored on a farmer's property before delivery, Hirai said.
Safety liability of employees hoisted in equipment to tarp high outside hay stacks also is eliminated, Schwendiman said.
"The parent company is big on safety. We're three weeks away from three years with no lost-time accidents," Schwendiman said.
A goal in the new facility is to unload incoming trucks as quickly as possible to save time so trucks can haul more loads, he said. Trucks will be unloaded inside using four new squeeze-operated lift trucks and three telehandlers, telescoping boom forklifts.
The plant has one hay press and a cubing operation producing 1 1/4-inch square hay cubes.
Zen-Noh Hay says it employs about 50 people and contributes more than $30 million annually to the local economy.