While Canadian forage exports remain firm with solid U.S. demand and interest from China providing some underlying support, concerns remain that transportation issues and exports from the U.S. Midwest may limit further upside potential.
Wayne Digby, executive director of the Canadian Forage and Grassland Association, said some of the underlying support in Canadian exports has been associated with strong demand from the U.S.
Drought conditions over Texas and Oklahoma last year have sparked a need for forage in order to cover livestock demand, he said, although Digby said it will be hard to tell what impact recent rainfall in the southern U.S. will have on Canadian exports to the southwestern U.S. this year.
Meanwhile, continuing interest from China for Canadian forage has also added some bullish sentiment in Canadian exports. The forage industry is working with China on protocol for timothy exports, which would allow for further shipments of the product, Digby said.
Two processing plants are currently able to ship alfalfa into the emerging market, which he described as good for overall business.
"China will be an interesting potential market if we can be competitive in that market," he said.
Other emerging markets could create some potential fresh demand for Canadian forage, including South Korea, Mexico, India and countries in the Middle East.
Canada exports 600,000 tonnes of forages annually on average, the CFGA has said, giving it about 10 per cent of the world's forage export market share. In 2011, Canadian exports in alfalfa, timothy hay, meal and pellets totaled over $85 million, according to Agriculture and Agri-Food Canada.
However, near-term challenges remain for the Canadian forage exports. Transportation issues remain a concern as they create a disadvantage for exporters, Digby said. Increased fuel costs, along with concerns over container availability, have added some pressure on moving Canadian forage out into the global market.
U.S. exports from the Midwest into the global market may also limit further upside Canadian export potential, he said.
Even with dry conditions in Western Canada and the potential for drought, it's still very early to tell what impact the current conditions will have on long-term export potential of Canadian forage, Digby said.