Market Morsel: Time to say ciao hay?

Market Morsel

It’s like Australian agriculture can’t get a break. Commodities impacted by barriers into China during the past couple of years have included barley, wine, lobsters, timber and beef.

The next commodity seemingly in the targets of China is hay.

To export hay into China, an export licence is required. There were 28 export facilities that had licences. Twenty-five of them have not had their licences renewed after they expired, and a further three have not yet expired.

The chart below shows the exports of all forage products to China and the rest of the world. This data includes hay but also includes other fodder products.

China has been a market for 20-30% of Australian forage exports, including hay and other exports. A loss of this volume will have a detrimental impact on demand.

After a good season and the potential for a good season again in the eastern states, this raises concerns. Demand in Australia is reduced as we move from a drought phase to an environment with grass on the ground.

We are now in a situation with large stocks and reduced domestic demand. Adding further export reductions to China makes for a poor outlook. It may be the case that this is just a bureaucratic mistake and licences will be forthcoming, but that may be more hope than reality.

This risk has resulted in calls from some exporters to growers to reduce production to reduce the capacity for increasing stocks. This is a concern for growers who are currently at the sticky end of making their planting decisions.

Do we say ciao hay to China for a while?