Making Hay: How Drought in California is Affecting Chinese Dairy Farmers and What the Chinese Government is doing about it

Drought in California is threatening Chinese dairy farmers. What is the Chinese Government doing about it?

Chinese consumers are hungry for beef and dairy. Domestic milk production has risen 10-fold in the past 20 years. [Wang]. And thirsty Chinese consumers mean hungry cows. Productive dairy cows can consume several tons of hay per year. [UNL] Unfortunately, Chinese production of hay has not kept up with demand – imports of US hay in the form of alfalfa increased from .2 MT in 2010 to 1.3MT, of 60% of overall consumption, in 2016 [USDA].

Economic overseas trade of hay is an oddity of our times. Historically, due to its low value:volume ratio, dairy farmers have typically looked to local – and certainly domestic – sources for their alfalfa. Now, container ships dropping off goods manufactured in Chinese factories are sailing back across the ocean packed with alfalfa. Shipping rates are had at bargain basement prices as the giant ships would otherwise return empty. [NPR][LA Times]

The practice is not without controversy. California alfalfa cultivation consumed more water than any other application during California’s historic drought over the past decade. [Hanson] In Arizona, water from the Colorado River feeds thirsty desert alfalfa farms producing silage destined for export. [NPR] As California residents are asked to tear up their lawns, limit their showers, and invest in pricey desalinization plants, is it sustainable to, in effect, export more than 100 billion gallons of precious water in the form of alfalfa to Chinese dairy farmers? Droughts in California are only becoming more common. [Stanford] Can the Chinese government afford to roll the dice on alfalfa imports from the USA?

Indeed, the Chinese government is taking numerous steps to domestic alfalfa supply. In the short term, the government has incentivized alfalfa production with annual tax credits and other financial incentives totaling $44m [Biomin][USDA]. In addition, the FAO (Food and Agriculture Organization of the United Nations) has been allowed to train farmers in the Ningxia Hui Autonomous Region on modern Alfalfa cultivation practices [FAO] To address the problem in the medium term, the government took a major step forward in its 13th 5 year plan for the agriculture sector, released in January 2017. [BMI][USDA] Specifically, the Ministry of Agriculture released its regional and nation strategies in the “National Alfalfa Industry Development Plan (2016-2020).” The report lays out a continued focus on the expansion commercial operations in the North and Northwest at the expense of grains, on local production/consumption in Northeast China and Inner Mongolia, and the production of silage in the South. [USDA][CN Chemicals]. Nationally, the five year plan calls for the development of new alfalfa varieties, expansion to 6 million mu (1  mu is approximately 1/6th acres) of alfalfa production, modernization of planting/harvesting techniques, and the construction of hybrid hay farms and dairy facilities. [USDA]

Through the five year plan, domestic hay production is expected to increase from 1.8MT in 2015 to 5.4MT in 2020. However, due to explosion in demand for beef and dairy products, import volume is expected to actually increase from 1.2 to 1.5MT in the period. [AgriHQ][Wang] The 1MT shortfall presents a risk to Chinese dairy farmers as suppliers in the western United States face increasing pressure to reduce water consumption. More needs to be done.

While data on alfalfa yield in China is limited, “field research suggests that most regions have low yield and low quality” [Wang]. US farms, by contrast, generated >3.3. tons per acre in 2015. [USDA Yield] To accelerate alfalfa yield improvements, the Chinese government should consider attracting American producers to form JVs with local Chinese alfalfa farms. In exchange for increased access to the Chinese alfalfa market, US firms can educate their Chinese counterparts on state-of-the-art farming practices.

In addition to enhancing domestic production, Chinese authorities ought to look diversify their hay supply geographically. Many studies suggest climate change will have different impacts on agriculture in different regions. [FAO Climate] In order to ensure economical import, additional international suppliers will have to already be receiving Chinese goods at their ports. Subscale but wealthy exporters such as Australia ($73M in 2015 hay exports to China in 2016, compared to $417 from the US) and Canada ($16.8m) may be good candidates. It may make sense for the Chinese government to with other major alfalfa importers such as Saudi Arabia (expected to import >1MT by 2018) to develop these markets. [UCANR]

The author is left with several open questions:

  • How likely is the US to reign in agricultural exports from climate change and drought impacted regions? Will state and regional economies make sacrifices in water consumption elsewhere to reap the economic benefits of alfalfa exports, or will new regulation stifle the trade?
  • Can the Chinese agriculture sector effectively modernize in the near term?
  • In the long term, will artificial production of meat and dairy goods render the entire problem moot?

(790 words)

 

[UNL] https://beef.unl.edu/cattleproduction/forageconsumed-day accessed 11/15/17

[USDA] USDA. Livestock and Poultry: World Markets and Trade. October 12, 2017

[LA Times] LA Times. U.S. farmers making hay with alfalfa exports to China. June 8, 2014

[Wang] Qingbin Wang, University of Vermont. China’s emerging dairy markets and potential impacts on U.S. alfalfa and dairy product exports. 2016 Agricultural & Applied Economics Association Annual Meeting, Boston, Massachusetts, July 31-August 2

[Hanson] Blaine Hanson, UC Davis. Irrigation of Agricultural Crops in California.

[Stanford] https://news.stanford.edu/2016/04/01/drought-patterns-change-040116/ accessed 11/15/17

[Biomin] Donald Xu, Biomin. China’s rising dairy industry. accessed 11/15/17

[CN Chemicals] http://www.cnchemicals.com/Press/89235-Domestic%20alfalfa%20production%20shell%20save%20China%E2%80%99s%20dairy%20market.html accessed 11/12

[AgriHQ] Zheng Wang, AgriHQ. China to triple quality alfalfa output in five years. 1/26/17

[FAO] http://www.fao.org/ag/AGP/AGPC/doc/ningxia_guide/ningxia_guide.htm accessed 11/12/17

[FAO Climate] http://www.fao.org/docrep/w5183e/w5183e0c.htm accessed 11/12/17

[UCANR] http://ucanr.edu/blogs/blogcore/postdetail.cfm?postnum=23472 accessed 11/12/17

[USDA Yield] https://www.usda.gov/nass/PUBS/TODAYRPT/cropan16.pdf accessed 11/15/17

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5 thoughts on “Making Hay: How Drought in California is Affecting Chinese Dairy Farmers and What the Chinese Government is doing about it

  1. What opportunities are there for GMO alfalfa that is perhaps more water-efficient?

  2. Hey Joey. Very interesting post. I do like the diversification idea in order to better prepare for a possible US reigning in of agriculture (which was a hotly debated topic in Arizona). I think I would like to take it a step further and ask about other sources of food for cows. For example, can China also begin importing US corn which is more readily available for export and can also act as actual human food.
    To answer your final question, I believe the artificial production of meat and dairy is very far away from being accepted culturally. However, I think that if/when that occurs, the fundamentals of agriculture will have to switch.

  3. Thank Joey, it is fascinating to see how climate change at one continent can significantly effect another one.
    I believe that if the US will stop supplying China with hay and China will not be prepared in time with enough hay from other countries or even if importing from other countries will be more expensive then milk prices will go up, causing an increase in the prices of domestic diary products which will therefore make room from cheaper imported dairy products. the US can therefore switch from importing hay to import dairy milk products (or meat) perhaps preventing the heavy water investment (if it could supply the gap in demand for those diary products)

  4. I would agree with you, Joey, that China will be hard-pressed to meet their rising demand for alfalfa in the coming years. In the short-term, the only consequence may be higher milk prices due to the shortage of milk which would level out some of the disparity between supply and demand. However, the long-term affects would be more significant. As we know, changes in climate will have dramatic affects on all agriculture products, not just alfalfa. This is part of that much bigger problem connected to feeding the growing population in the midst of changing climate. I would also agree with dcook8872 above, who noted that artificial dairy production may not be initially culturally accepted.

  5. Joe, being a fellow California resident, I resonate with your question of whether or not governments will get involved to curtail production of certain agriculture/crops that may bring economic benefit for the few but far less water for the masses. It is an interesting question to ponder because thousands upon thousands of California residents have staked their career and future on agriculture as a means of providing food for their families. If a government can intervene and restrict these families from working, what is the compensation the government can give in return? A single year of monetary compensation? Five years of subsidized operations? Whatever decision governments make, it won’t be one without sacrifice.

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