Spain: Dehydrated Fodder Sector

An Expert's View about Agriculture and Animal Husbandry in Spain

Posted on: 9 Mar 2010

Spain’s hay production forecast for MY 2010/11 rose to 1.7 million MT. Favorable prices for dried fodder coupled with low grain prices triggered the production increase. As internal demand for hay within Spain remains weak due to the current dairy sector crisis, Spanish producers see the recent growth in third-country exports, particularly to the United Arab Emirates, as a solution to balancing their supply/demand situation.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Voluntary - Public Date: 2/18/2010 GAIN Report Number: SP1002 Spain Post: Madrid SPAIN?S DEHYDRATED FODDER SECTOR Report Categories: Grain and Feed Approved By: Margaret E. Thursland Agricultural Counselor U.S. Embassy Madrid Prepared By: Marta Guerrero Agricultural Specialist Report Highlights: Spain?s hay production forecast for MY 2010/11 rose to 1.7 million MT. Favorable prices for dried fodder coupled with low grain prices triggered the production increase. As internal demand for hay within Spain remains weak due to the current dairy sector crisis, Spanish producers see the recent growth in third-country exports, particularly to the United Arab Emirates, as a solution to balancing their supply/demand situation. SP1002 - Spain?s Dehydrated Fodder Sector 2 Disclaimer: This report presents the situation for forage production and exports in Spain. This report contains the views of the authors and does not reflect the official views of the U.S. Department of Agriculture (USDA). The data are not official USDA data. Abbreviations used in this report: CMO Common Market Organization EC European Commission EU European Union FAS Foreign Agricultural Service GTA Global Trade Atlas SPS Single payment Scheme HS Codes: Harmonized System codes for commodity classification used to calculate trade data. Harmonized Codes for Dehydrated Fodder: 1214 Rutabagas (Swedes), mangolds, fodder roots, hay alfalfa (lucerne), clover, sainfoin, forage kale, lupines, vetches and similar forage products, whether or not in the form of pellets. 121410 Alfalfa (Lucerne) meal and pellets; dehydrated, sun-cured and other. 121490 Hay (including alfalfa, whether or not double compressed, and Timothy); clover; and other. MS EU Member State(s) MT Metric ton (1,000 kg) MY Marketing year (May/April) PS&D Production, Supply and Demand Ha Hectares N/A Not Available SP1002 - Spain?s Dehydrated Fodder Sector 3 General Information: Production Spain is the EU leader in dried fodder production. This is a result of favorable climatic conditions for dehydrating and aid provided to growers and processors under the EU?s Common Organization of the Market in Dried Fodder. While Spain?s warm and dry climate is more favorable than other EU Member States for the dehydration process, there is a self-imposed requirement to deliver Spanish fodder to dehydration plants with at least 25 percent moisture content. Fodder cultivation expanded when Spain joined the European Union in 1986 and became subject to the Common Organization of Dried Fodder Markets (CMO). Since then, fodder production, and dehydrated alfalfa in particular, have generally been on the rise. In 2007/2008, production of dried fodder declined. A sharper decline occurred in MY 2008/2009, as alternative arable crops, including grains, offered better prices early in the season - resulting in reduced planted area for fodder. Table 1. Spain: Area Planted to Subsidized Dried Fodder (Hectare) Market Alfalfa Vetch Sainfoin Fescue Corn Rye Other Total Year Grass Grass 2005/06 165,989 2,162 285 N/A 762 5,649 11,254 186,102 2006/07 164,020 4,716 956 5,596 1,190 8,274 7,176 191,928 2007/08 143,554 4,583 506 6,043 1,197 7,744 5,994 169,623 2008/09 122,411 4,039 679 5,696 1,248 5,972 5,993 146,038 Source: FEGA (Spanish Agricultural Guarantee Fund) In MY 2009/2010, production is expected to reach higher levels as reduced grain prices have encouraged growers to shift to alfalfa. Current prices of alternative crops indicate a recovery in fodder production for MY 2010/2011. SP1002 - Spain?s Dehydrated Fodder Sector 4 Table 2. Spain: Production of Subsidized Dried Fodder (MT) Market Dehydrated Sun Dried Total Year Fodder Fodder 2005/06 1,801,596 120,393 1,921,989 2006/07 1,832,791 141,860 1,974,651 2007/08 1,683,736 98,603 1,782,339 2008/09 1,317,700 209,800 1,527,500 2009/10 1,553,309 157,300 1,710,609 2010/11 1,600,000 145,000 1,745,000 Source: AEFA (National Dried Alfalfa Producers Association) and FAS estimates Processing There are different techniques in preserving fodder through reducing moisture content, mainly dehydration, sun-drying and milling. The resulting product includes pellets and bales. Bales are the most common product, representing up to 75 percent of total production. Table 3. Spain: Dried Fodder Product by Production Type (MT) Market Year Pellets Bales Total 2005/06 634,256 1,287,732 1,921,989 2006/07 671,381 1,303,269 1,974,651 2007/08 605,995 1,176,343 1,782,339 2008/09 534,625 534,625 1,527,500 2009/10 427,652 1,282,956 1,710,609 2010/11 436,250 1,308,750 1,745,000 Source: AEFA (National Dried Alfalfa Producers Association) and FAS estimates There were 100 dried fodder processing plants in Spain in 2005. In 2008, only 76 were operational. All of these remaining plants are expected to continue operating through 2010. The processing plants are only open during the April to October fodder harvesting period. SP1002 - Spain?s Dehydrated Fodder Sector 5 Table 4. Spain: Location of Processing Plants Region Number of Plants Production in MY 2008/2009 Aragon 38 847,000 Cataluña 13 355,000 Castile y Leon 12 156,000 Castile-La Mancha 5 64,000 Navarra 4 64,000 Andalusia 2 34,000 Extremadura 1 4,000 Balearic Islands 1 3,000 Total 76 1,527,000 Source: AEFA (National Dried Alfalfa Producers Association) Table 5. Spain: Number of Processing Plants by MY Marketing Year Number of Processors 2005/06 94 2006/07 86 2007/08 80 2008/09 77 2009/10 76 2010/11 76 Source: AEFA (National Dried Alfalfa Producers Association) Consumption The main consumers of dehydrated forage are dairy cows. The current crisis in the domestic dairy sector and the resulting inventory decline has resulted in a drop in Spain?s demand for forage. Table 6. Spain: Dairy Cow Population (1,000 heads) Year Dairy Cow Population 2006 982 2007 932 2008 888 2009 853 Source: Eurostat SP1002 - Spain?s Dehydrated Fodder Sector 6 Trade According to GTA data, the EU-27 is among the world?s three largest exporters of hay. Over the past four years, Spain accounted for more than 45 percent of total EU hay exports and is the EU Member State with the largest volume of hay exports to non-EU markets. Table 7. World: Major Hay Exporters Country 2005 2006 2007 2008 United States 2,847,112 2,967,814 2,846,196 2,899,766 Australia 2,009,545 1,296,182 1,342,338 783,674 EU-27 228,419 316,455 425,354 717,087 Canada 679,266 615,947 676,928 746,138 Source: GTA Imports of hay into Spain are minimal as compared to exports and are mainly sourced from other EU Member States. The major neighboring sources for dehydrated fodder are France and Portugal. Bales are the preferred product in third-country markets. In MY 2008/2009, bales represented about 65% of total exports. Spain?s hay exports have grown remarkably since MY 2005/2006. In 2008, the United Arab Emirates (UAE) represented over 57 percent of Spain?s total exports and 80 percent of extra-EU exports. Export data for MY 2009/2010 through October 2009 indicates an even higher percentage of Spanish fodder delivered to the UAE this marketing year. Bales are the preferred product in third-country markets. In MY 2008/2009, bales represented about 65% of total exports. Table 8. Spain: Total Imports of Fodder by Origin in MT * C MY MY MY MY MY ountry of Origin 2005/06 2006/07 2007/08 2008/09 2009/10 EU-27 119,415 11,091 17,089 26,787 17,800 Others 254 863 899 54 1,200 TOTAL IMPORTS 120,640 11,954 18,218 28,028 19,000 Source: GTA and FAS estimates * Includes both bales and pellets. SP1002 - Spain?s Dehydrated Fodder Sector 7 Table 9. Spain: Total Exports of Fodder by Destination in MT * Country of MY MY MY MY MY Destination 2005/06 2006/07 2007/08 2008/09 2009/10 United Arab Emirates 27,568 157,376 202,804 297,304 372,000 EU-27 182,459 213,033 208,672 149,758 107,000 Morocco 0 32,844 44,508 25,828 41,000 Others 5,405 16,224 36,132 50,141 50,000 TOTAL EXPORTS 215,432 419,477 492,116 523,031 570,000 Source: GTA and FAS estimates. * Includes both bales and pellets. Table 10. Spain: Imports of Fodder by Origin in MT (Bales) Country of MY MY MY MY MY Origin 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 EU-27 17,545 9,148 15,674 18,168 14,800 Others 1,224 863 1,129 1,219 1,200 TOTAL 18,769 10,011 16,803 19,387 16,000 Source: GTA and FAS estimates Table 11. Spain: Exports of Fodder by Destination in MT (Bales) Country of MY MY MY MY MY Destination 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 EU-27 121,680 136,921 69,777 48,750 44,000 United Arab Emirates 27,393 151,187 177,462 266,859 350,000 Saudi Arabia 0 0 1,036 8,153 45,000 Kuwait 249 473 1,037 5,569 1,000 Others 2,403 9,652 4,641 10,108 10,000 TOTAL 151,725 298,233 253,953 339,439 450,000 Source: GTA and FAS estimates Table 12. Spain: Imports of Fodder by Origin in MT (Pellets) Country of MY MY MY MY MY Origin 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 EU-27 101,870 1,942 1,417 5,967 3,000 Others 0 0 0 0 0 TOTAL 101,870 1,942 1,417 5,967 3,000 Source: GTA and FAS estimates SP1002 - Spain?s Dehydrated Fodder Sector 8 Table 13. Spain: Exports of Fodder by Destination in MT (Pellets) Country of MY MY MY MY MY Destination 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 EU-27 60,782 76,110 138,893 88,306 63,000 Morocco 0 32,796 44,437 25,593 25,000 United Arab Emirates 175 6,189 25,344 22,835 22,000 Others 2,751 6,150 29,489 24,855 10,000 TOTAL 63,708 121,245 238,163 161,589 120,000 Source: GTA and FAS estimates Policy In 2006, the existing EU support for the dried fodder sector was redistributed between growers and the processing industry on a 50/50 basis. Direct support to growers was integrated into the Single Payment Scheme (SPS), based on their historical deliveries to the industry and within national support ceilings. As of 2006, aid to processors was fixed at EUR 33 per ton within the Maximum Guaranteed Quantity (MGQ) system for both dehydrated and sun-dried fodder. A single dried fodder MGQ for the EU-15 of 4,855,900 MT merges the previous maximum guaranteed quantities for dehydrated and sun-dried fodder. For the new Member States, there is a separate MGQ of 104,823 MT. The total EU-25 MGQ is 4,960,723 MT. The MGQ is split into Guaranteed National Quantities (GNQ) by Member State. Under this system, penalties are imposed (reductions in aid) if the EU MGQ is exceeded by any Member State for one year. Penalties are applied in those countries which are responsible for the overrun. If EU dried fodder production during a given marketing year does not exceed the MGQ, the full aid is paid. SP1002 - Spain?s Dehydrated Fodder Sector 9 Table 14. Guaranteed National Quantities for Dehydrated and/or Sun-Dried Fodder Member State GNQ (MT) MGQ (MT) Belgium-Luxemburg 8,000 Denmark 334,000 Germany 421,000 Greece 37,500 Spain 1,325,000 France 1,605,000 Ireland 5,000 4,855,900 Italy 685,000 Netherlands 285,000 Austria 4,400 Portugal 30,000 Finland 3,000 Sweden 11,000 UK 102,000 Czech Republic 27,942 Lithuania 650 Hungary 49,593 104,823 Poland 13,538 Slovakia 13,100 Total 4,960,723 4,960,723 Source: Regulation (EC) 1786/2003 and Regulation (EC) 1234/2007 Graph 1. Guaranteed National Quantities for Fodder Source: Regulation (EC) 1786/2003 and Regulation (EC) 1234/2007 SP1002 - Spain?s Dehydrated Fodder Sector 10 Requirements for Dried Fodder Aid in Spain To be granted a production subsidy of 33 Euros per MT, the processing industry must have contracts with farmers which establish price and acreage. In the event that the dehydrating plant has its own fodder production or acquires fodder from authorized buyers, delivery declarations are required. Regarding quality standards, fodder to be dehydrated or milled in the plant must have a minimum moisture content of 25%. The product obtained must have a maximum moisture content of 12% in the case of sun-dried fodder or dehydrated fodder that has undergone a milling procedure. The maximum moisture content can be up to 14% for other dehydrated products. In addition, sun-dried fodder must undergo a milling procedure within the processing plant to be eligible for the subsidy. The minimum protein content as compared to dry matter must be 15%. According to Spain?s proposed implementation of the Common Agricultural Policy Health Check, the current dried fodder processing support will be included in the national single payment scheme for 2012. Production, Supply and Demand Table 15. Spain: Production, Supply and Demand for Dehydrated Fodder Mar MY MY MY MY MY ket Year Units 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 Beginning Stocks 0 0 0 0 0 (1000 MT) Production 1,921,989 1,974,651 1,782,339 1,527,500 1,710,609 (1000 MT) Imports 120,639 11,953 18,220 25,354 19,000 (1000 MT) Total Supply 2,042,628 1,986,604 1,800,559 1,552,854 1,732,609 (1000 MT) Domestic C 7,195 1,567,126 1,308,443 1,051,826 1,162,609 (1000 MT) onsumpt 1,82ion Exports 215,433 419,478 492,116 501,028 570,000 (1000 MT) Ending Stocks 0 0 0 0 0 (1000 MT) Total Demand 2,042,628 1,986,604 1,800,559 1,552,854 1,732,609 (1000 MT) Source: FAS estimates As a result of higher production and lower domestic consumption, Spain?s self-sufficiency rate for dehydrated fodder exceeded 140% for MY2007/2008. Weak domestic demand was supplemented with increased third-country exports, in particular the UAE. Future prospects for Spain?s dehydrated fodder sector will be tied to developments in substitute crops, SP1002 - Spain?s Dehydrated Fodder Sector 11 such as corn. The domestic livestock situation and third-country demand will determine the viability of dehydrated fodder in Spain, especially starting in 2012 when support provided to the dried fodder processing industry will be decoupled.
Posted: 09 March 2010

See more from Agriculture and Animal Husbandry in Spain

Expert Views    
Grain in Spain – The Final Stretch   By Foreign Agricultural Service
Crop update - Smaller than Forecast Harvest   By Foreign Agricultural Service
Agricultural Biotechnology Annual 2012   By Foreign Agricultural Service
Hot Tips    
Spain's Citrus Annual 2009   By Foreign Agricultural Service
Spain EU-27 EU-27 TREE NUTS SEMI-ANNUAL   By Foreign Agricultural Service