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Asian drought seeds northern B.C. boon

Frank O’Brien, Business in Vancouver, June 7, 2016

Rain and thousands of hectares of verdant farmland have sparked a new multimillion-dollar industry in the outback of northern British Columbia: harvesting hay and shipping it to drought-stricken livestock producers in China and Korea.

From a standing start four years ago, nearly 10,000 tonnes of hay per year is now being baled and shipped in containers to Asia out of the Port of Prince Rupert. Its main destination is China, and the main producer is Judd Wu, a Chinese national who bought 4,000 hectares (10,000 acres) of farmland near Vanderhoof in 2012.

“We shipped 10,000 tonnes last year, and our goal is to export 100,000 tonnes,” said Wu’s nephew, Jason Wu, plant manager of the sprawling Tophay Agri-Industries facility. “China will buy everything we can produce."

At Tophay, the largest of two hay producers in the Vanderhoof area, the hay crops – primarily alfalfa – are compressed into small, tight, 25-kilogram bales, loaded into container trucks and hauled to the Canadian National Railway (TSX:CNR) rail yards at Prince George. From there the containers are railed to the Prince Rupert container port.

More than half the crop is shipped to China, the rest to Korea, but Wu said world demand is growing exponentially as a historic drought stalks the world’s most populated regions. Tophay has begun shipping to the United Arab Emirates and plans to increase exports to Japan and other East Asia countries.

After years of record-breaking drought, groundwater levels hit the historic lows this year in northeast and central parts of China, home to hundreds of millions of people and the world’s largest sheep herds. More than half the country’s 50,000 significant rivers have dried up and widespread pollution has contaminated 60% of the country’s groundwater, according to the Chinese Academy of Social Sciences. From rural China to Mongolia, livestock are being slaughtered because there’s not enough water to grow feedstock.

Meanwhile, South Korea is suffering the worst drought in more than a century, raising worries about damage to crops and a dangerous drop in water levels in the nation’s reservoirs.

“The worst drought in 104 years is causing damage to our agricultural and livestock industries,” Finance Minister Bahk Jae-wan said at a recent crisis management meeting in Seoul.

Even the U.S., a primary producer of livestock feed, is going dry. The U.S. Drought Monitor reports that more than 15% of the continental U.S. is facing drought conditions. California, which produces nearly half of the produce grown in the United States, is in a state of emergency and the fifth year of a prolonged drought. Ranchers and farmers in the Midwest, from the Alberta border to Texas, have battled drought since 2000.

On the west coast of Canada, however, rain and forage crops are plentiful.

“Every time it rains in B.C., we should get down on our knees and give thanks,” said Rudy Nielsen, the largest farmland agent in the province, president of Niho Land & Cattle Co. and co-founder of LandQuest Realty Corp. of New Westminster.

Nielsen said the near-global drought has focused international attention on B.C. farmlands, and not just in the Fraser Valley near Vancouver where an acre of blueberries can sell for $80,000 or more, the highest values in the country.

It is in B.C.’s high country, the hayfields and ranch lands from the Cariboo to Nechako, where global demand is concentrated, he said.

Richard Osborne, president of LandQuest, said demand for B.C. farmland the past five years has changed from speculation to desperation. He said LandQuest, which has more than 330 active listings – including ranch and farmlands – now deals with buyers from 190 countries.

“We sell B.C. to the world.”

Wu said the Vanderhoof area’s major attraction is its ability to have huge and contiguous hayfields, some capable of producing two cuts of high-quality hay annually.

“The land prices are also much lower than in China,” he said.

B.C. is the only western province with no restrictions on foreign ownership of farmland.

An acre of fertile farmland in northern B.C. costs about the same as a square foot of a condo apartment in Vancouver or Hong Kong, Nielsen noted.

An example is a 3,659-acre parcel north of Dawson Creek that has nearly 1,500 acres under hay. It is priced at $4.2 million.

LandQuest also has a 142-acre spread for sale near Vanderhoof and recently listed a 240-acre farm at Williams Lake. Either is available for less than $395,000.

Investors from China are buying more than northern B.C. farm fields to capitalize on potential forage exports. Burnaby-based and China-backed Taisheng International Investment Services bought 1,187 acres of industrial-zoned land from the City of Terrace in 2014 for $11.8 million. Taisheng is a subsidiary of China’s Qinhuangdao Economic and Technological Development Zone, one of the country’s oldest special market areas, founded near Beijing in 1984. Taisheng is adding services to 640 acres of its Terrace site in preparation for the first manufacturing facility: an alfalfa baling and export operation. The alfalfa factory will be located on about 27 acres and will bring 170 new jobs to the region, according to Terrace officials.

Terrace, with its proximity to port facilities at Prince Rupert, Kitimat and Stewart, is one of the closest locations in North America to Asia in terms of shipping distances, noted Richard Zhang, Taisheng’s managing director.