By DAN WHEAT

Capital Press

U.S. hay exporters, most of whom are on the West Coast, are continuing to slowly lose market share in the major markets of the Middle East, China, Japan and South Korea because of high U.S. prices, two top exporters say.

The slowing is with alfalfa while demand for timothy and sudan grass hay remains strong because supply of those is tighter, said Nicholas Gombos, vice president of supply chain and logistics for ACX Pacific Northwest, in Wilmington, Calif.

"We're seeing more supply from other countries because our prices have been high for so long," Gombos said. "Two seasons in a row has opened the door to a lot more competition."

The United Arab Emirates and China nearly doubled their purchases of U.S. hay between 2008 and 2012, but the UAE can get cheaper hay from South Africa, Egypt and Spain and is turning more to those countries, said Jeff Calaway, president of Calaway Trading Inc., Ellensburg, Wash. UAE still buys about 60 percent of its hay from the U.S., he said.

Last summer's Midwest drought reduced supplies of corn and high speculative prices drove away buyers and kept prices of other commodities, including hay, high, Gombos said. Since then corn prices have fallen and the true shortness of supply is questionable. Hay prices, while still well above $200 per ton, have fallen $10 to $25 a ton, depending on the region, from September.

One hundred dairies went out of business in California in 2012 because of high costs but the number of cows dropped only 5 percent as they were sold to other dairies, Gombos said. Still that contributed to less demand for hay, he said.

"I think there's more inventory right now than people thought there would be," he said.

But whether it will be long or short before new crop harvest starts in March in Arizona and California, is hard to know, he said.

The trend of the Pacific Southwest increasing hay exports at the expense of the Pacific Northwest continues because of the continued high cost of shipping out of the ports of Seattle and Tacoma versus the ports of Long Beach and San Pedro, Calaway said.

It can cost, on average, $1,000 per container to ship hay to China from the Northwest versus $300 from Los Angeles area ports, Calaway said.

"What's kept us alive is that we have timothy and other products," he said. "If we relied on alfalfa up here (Northwest) we'd be in real trouble."

The situation is no worse but no better than a year ago, Gombos said.

The PNW has a lack of containers and lack of space on ships due to Seattle and Tacoma handling less import and export volume than Los Angeles, he said.

It's cheaper to truck hay from the Northwest and even Idaho and Alberta to Los Angeles, press and ship it from there than ship from Puget Sound, Calaway said.

But despite freight costs and lessening foreign demand, U.S. hay exporters should be doing well enough because demand is still strong to cover a lot of problems, Calaway said. Whether it will be going forward is the question, he said.

Japan remains the largest market but the yen is weakening, which makes Japanese importers more price sensitive and doesn't play into our business model, Calaway said.

Eastern Washington growers mostly had a good year but are not likely to increase hay acreage in 2013 because corn and wheat prices are still good enough to be attractive, said Chep Gauntt, a Kennewick, Wash., grower.