Delving into the export business: Thoman jumps into hay exports, learns new lessons
Pavillion – Wyoming’s hay is some of the highest quality forage in the world, says Pavilion hay producer and Ky Enterprises, LLC owner Kyle Thoman. At the same time, Thoman noticed that transportation costs for hay were decreasing the profitability in raising hay.
“We’re so far away from our markets that the cost of transportation is eating up our profits,” Thoman comments. “Hay in Texas and California travels, on average, 50 to 100 miles to the nearest dairies.”
Because of the transportation costs to get Wyoming hay to the same locations, producers may only receive half the compensation, even though the quality is higher.
“I was originally looking for a way to increase the profitability of raising hay by finding some better markets,” he says.
Thoman explains that because Wyoming hay is high quality, it brings benefits to producers.
“The higher quality the hay, the less you have to feed to meet an animal’s requirements,” he says. “We can add more filler, like straw or lower quality hay, and still meet feed requirements.”
Thoman notes that he also explored the logistics of hay transportation in his college thesis.
“Part of my thesis work was trying to reduce logistics costs for Wyoming hay producers to increase the value that they were receiving,” Thoman says.
“When I kicked off, I was looking at trying to utilize railroad transportation to ship hay out of Wyoming, which was a big deal in the eighties and early nineties,” Thoman explains. “They were shipping hay cubes and hay down to Texas.”
However, the problem comes in volume and payment for hay. Thoman continues that producers weren’t paid until the hay arrived at its destination, which meant that farmers may not be paid for weeks.
“I spent a lot of times at dairy shows and went to the World Dairy Expo. I also spend some time talking to dairymen, ranging from Amish folks to Chinese, Vietnamese, Saudi Arabians and other ambassadors from countries interested in importing hay for dairies,” he says.
China’s native hay has a relative feed value (RFV) of 100 on average. Western states average 110 to 150 RFV, but Wyoming is known to produce hay with RFV of 200 to 300, Thoman says. Dairy cows need hay with an RFV of at least 170 to sustain high-quality milk production.
“The idea was to send our hay over to China where they can mix it with their native hay. They’d handle less hay, and it would be a more economically viable feed for them,” he says.
Eventually, Thoman explains that the Wyoming Business Council (WBC) received a call from a Chinese hay company interested in Wyoming hay.
“The WBC called me and asked if I would be willing to work with them on creating a market for our hay,” he says. “I agreed, of course, and spent quite a bit of time working on it.”
Thoman spent time at the Port of Long Beach, Calif. to learn about how hay is shipped out of, and he also visited operations in New Mexico and Arizona that were currently exporting hay.
“Seven states west of Wyoming export hay, but we produce superior quality hay,” Thoman says. “The problem is, our transportation costs are two or three times more than other states. Even with the increase in quality, we have a hard time justifying the increase in logistics costs.”
Thoman explains that the idea was to band together as a group of producers and export larger volumes of hay, to make it more effective.
“In our contract, we agreed that I would source all the hay. We sent out 1,500 to 2,000 tons in 2015,” he says. “The challenge is, it has to be extensively tested, and testing takes so long.”
There are five requirements that must be met before hay can be exported. First, it must meet dimensional requirements. Chinese importers prefer three-foot by four-foot by eight-foot bales. Other sizes are discounted.
“The hay must also pass a color test, and they don’t want it to be over 10 percent moisture,” Thoman says. “The hay also has to free of genetic modification. The Chinese government doesn’t accept any genetically modified products.”
Finally, the hay has to be free of a fungus called fusarium.
“About one in 10 samples clears all five tests,” Thoman says. “It’s a really tough benchmark.”
Thoman notes that with all the challenges present, coupled with falling hay prices, the idea to export hay quickly became a task.
He was sourcing hay from several different producers across the state, and all the hay had to be quality controlled and sorted, even after testing.
“The last thing we had a problem with is clearing hay,” he says. “Every bale had to be hand-picked from a stack, and seven out of 10 bales were kicked out when we loaded the trucks. They were sorted again at the ports, and sometimes more were kicked out.”
With so many troubling aspects behind the venture, Thoman says, “We’re in a stalemate right now.”
However, he notes that they are working on other countries to partner with, as well.
“We’re looking at partners in Vietnam, Cambodia, Saudi Arabia and others,” he says.
Despite the trouble with exports, Thoman says he’s learned a lot and is ready for the next place where opportunity might present itself.
Thoman adds, “We’re producing really high quality hay here in Wyoming, and we’re trying to get through all the regulations.”
Saige Albert is managing editor of the Wyoming Livestock Roundup and can be reached at firstname.lastname@example.org.