SANPETE COUNTY — In the last five years, a new business has exploded in Utah. The Beehive State is exporting enormous amounts of hay to China and raking in tens of millions of dollars a year in the process.
A number of questions have arisen from the boon. First, how can it possibly be cheaper to grow a bulky product like hay and ship it halfway across the globe? Secondly, why are the Chinese looking to Utah farms for hay? And finally, what about the state's water shortage?
For Utah farmers like Tom Bailey, China's desire for U.S. hay is great news. In fact, he's "making hay."
"We look forward to some continued growth there," said Bailey of Bailey's Farms, an Ephraim outfit that now has a branch office in Beijing with six employees. "We don't know how long it's going to continue that way, but China is a very aggressive country right now."
With the help of compression equipment, hay is squeezed into shipping containers. In Long Beach, Calif., the containers are loaded onto ships that travel 6,000 miles across the ocean.
In Eastern Utah, Escalante Ranch is cashing in on China's hunger for hay.
The 3,287-acre farm was bought last year by Los Angeles businessman Simon Shao, who exports most of his hay across the Pacific to the country where he was born.
"They don't have enough of the land producing the hay over there," said Shao, owner of Green Pasture International, Inc.
Shao's data shows that China's consumption of U.S. hay has really taken off.
According to Shao, it grew from 5,000 tons in 2007 to 460,000 in 2012. He estimates the tally will reach 600,000 tons this year.
We don't know how long it's going to continue that way, but China is a very aggressive country right now.
–Tom Bailey, Utah farmer
As for Bailey's, the farm's exports started in 2007. In 2010, the farm shipped 27,000 tons to China, 58,000 tons last year, and likely more this year.
"In China, they have 1.3 billion people," Shao said. "It's pretty hard for them to get all the food for the human beings already." Let alone food for cows.
Shao said China has plenty of land, but much of it is of poor growing quality.
Incredibly, Chinese dairies can buy high-protein hay from Utah cheaper than from farms in China. Partly that's because of modern agricultural efficiencies in the U.S. Another reason is cheap freight costs on ships departing from Long Beach.
Ironically, the cheap shipping results from the U.S.'s poor balance of trade. The U.S. buys twice as many goods from China. So many westbound ships offer bargain-basement freight rates.
"Rather than go back empty, they're looking for something to go back in them," Bailey said.
Bailey said exporting hay is good business for a state that produces huge amounts of high-quality hay, but uses relatively little. Bailey's sells even more hay to the Middle East.
"Whether it's exported to China or exported to New York City, I see no difference in that," Bailey said. "It's not staying in the Intermountain West."
Shao pointed out that China buys far more soybeans, corn, and wheat from the U.S. than alfalfa hay.
But what about water concerns? Growing hay requires lots of it.
Some critics say it means a water-poor state is exporting too much of its precious water to China. John Hollenhorst will explore the water issue in a report that will air Tuesday at 10 p.m.