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December 19, 2014

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China’s hungry cattle feasting on alfalfa grown on Utah farm

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Stuart Leavenworth / MCT

The Escalante Ranch is largely mechanized, using pivot sprinklers to irrigate 3,000 acres of alfalfa on the 22,000-acre ranch. Dinosaur National Monument can be seen in the background near Jensen, Utah, on June 11, 2014.

China’s U.S. Farms

Sprinklers irrigate alfalfa on the Escalante Ranch, in northeast Utah, on June 11, 2014. The ranch is the largest Chinese-owned alfalfa ranch in the United States, used to supply hay for China's growing dairy industry. Launch slideshow »

JENSEN, Utah — It's easy to find the largest Chinese-owned hay farm in the United States. It sits 189 miles east of Salt Lake City, on a stunningly scenic bend of the Green River. After driving past the only gas station in Jensen, population 400, a visitor crosses the river, turns left and is soon surrounded by a meticulously managed, 22,000-acre ranch, lush with green alfalfa.

Nearly all of it is destined for China. Three years ago, a pair of Chinese entrepreneurs purchased this alfalfa farm for a discount price of less than $10 million. Each year since, they've shipped about 22,000 tons of super-compacted, ranch-grown alfalfa to China, where it's highly prized by the nation's growing dairy industry.

China has long depended on the U.S. breadbasket, importing up to $26 billion in U.S. agricultural products yearly. But increasingly, Chinese investors aren't just buying from farms abroad. They're buying the farms.

When a Chinese conglomerate paid $4.7 billion last year for Smithfield Foods Inc., the world's largest pork producer, it assumed control of vast tracts of farmland in North Carolina, Virginia and other states — possibly 100,000 acres or more. Chinese private businesses and state-owned industries have also purchased farmland in Australia, Ukraine and parts of Africa and South America.

While China still ranks far behind the United States in foreign agricultural investments, its interest in farms abroad has prompted concerns about putting too much of America's food supply in foreign hands. Missouri is one U.S. state where the farm bureau is pressing for lawmakers to reinstate a ban on foreign ownership of farmland. Other states and countries are considering similar bans.

Simon Wen Shao, a Chinese-born U.S. citizen who's a co-owner of the Utah alfalfa farm, acknowledged that locals had acted warily when his company purchased the ranch. Friends of his farm manager, Frank Biggs, immediately chided Biggs for "working for the communists."

Shao said those concerns had eased as his company had attempted to build ties in the community, buying new farm equipment and modernizing the ranch. One of his first steps was to rename the historic property "Escalante Ranch" after the previous owner had dubbed it "Thunder Ranch."

"I think local people liked that decision," he said during a tour of the farm. "It sounds better than Red Dragon Ranch."

Bespectacled and a bit of a wisecracker, Shao seems like an unlikely rancher, and he admits that he is. He got into the business when an old college buddy, Zhang Renwu, started a feed firm in 2007 called Lu Tian Yuan Ecological Farm Co. in Beijing, where Zhang continues to live.

Lu Tian Yuan also owns an alfalfa farm in Zhang's home province of Inner Mongolia, in northern China. But Zhang quickly learned it would never produce enough premium alfalfa to meet the needs of his customers in China.

"To grow high-quality alfalfa, you have to have certain growing conditions," Zhang said during an April interview in Beijing. The Western United States offers those conditions, with reliably warm, dry weather. In northern China, rain falls during much of the growing season, resulting in hay that can quickly rot.

Shao, who lives in Los Angeles, agreed to join Zhang in developing an alfalfa import business through a U.S. entity, Green Pasture International. Over the last decade, he and Zhang have partnered with Bailey Farms, an alfalfa company based in Ephraim, Utah. According to Shao, it was Bailey that alerted him to Thunder Ranch when it went on the market following the real estate bust of the late 2000s.

"They said to me, 'Hey, Simon, this ranch is for sale,' " he said. "So I came out to visit it and I knew right away this was a super-good spot. And at that time, the price was so good."

Just on the other side of the Green River from Dinosaur National Monument, Shao's ranch is regal in size, with more than 3,000 acres of irrigated fields and a large expanse of rolling hills and wetlands, frequented by ducks and migrating elk herds.

Along with visual splendor, the historic ranch comes with generous water rights, essential for growing alfalfa in the high desert. Lu Tian Yuan pays nothing for water it pumps from the river, other than electricity costs, which Shao says comes to $20,000 yearly. With mechanized pivot sprinklers and modern farm equipment, a crew of four employees can run the ranch year-round, whereas in China — where hundreds of millions of people are still dependent on farm employment — it would involve hundreds of workers, Zhang said.

Shao and Zhang said they often heard two questions about their business. The first is: Why is the United States allowing its valuable water to be shipped to China in the form of alfalfa?

"This is so ridiculous," said Shao. He noted that the United States and many other countries ship a variety of water-intensive crops abroad. "Why does alfalfa get so much attention?"

The other: How could it possibly make economic sense to ship a bulky product such as alfalfa hay 7,000 miles to China?

The answer, said Zhang, involves the enormous U.S.-China trade imbalance. Because China ships so many goods to West Coast ports, freight companies offer relatively low rates on container ships that might otherwise return to China empty.

Shao said his company paid a hefty price — about $177 a ton — to compact the hay and truck it to Long Beach, Calif., and other ports. Even so, he said the alfalfa commanded such a high price in China that sales more than covered the costs of production and transportation.

Daniel Putnam, an agricultural economist and alfalfa specialist at the University of California, Davis, said he had little doubt the Escalante Ranch made a healthy profit. Milk prices in China are several times higher than in the United States, he said, prompting dairy farms in China to pay up to $480 a ton for imported alfalfa. In addition, he noted, China puts a priority on reserving its remaining farmland for wheat, corn and other crops consumed by humans. That forces dairies and livestock farms to look elsewhere for alfalfa and other feed.

"There's a real advantage for a Chinese (export) company that has bought a ranch in Utah," said Putnam. "They don't have to compete in buying alfalfa at a high price."

Until the 1990s, most Chinese dairy farms were small, and largely indifferent to what they fed their cows. In 2008, a major health crisis erupted in China when it was found that some dairies were using melamine, a material used in plastics, to artificially boost the protein in milk and milk powder.

Since that scare, the Chinese dairy industry has scrambled to fend off foreign competition and secure more and more alfalfa. From 2009 through 2013, U.S. exports of alfalfa hay to China rose eightfold, to nearly 635,00 tons, according to the Denver-based Livestock Marketing Information Center. Nearly all of that came from seven Western states: Arizona, California, Idaho, Nevada, Oregon, Utah and Washington.

Shao sees demand staying high for at least another decade. Business is so good that he and Zhang recently purchased another 1,500-acre alfalfa ranch not far from Jensen.

So far, the presence of a growing Chinese alfalfa-export enterprise has stirred just smatterings of reaction in nearby Vernal, the county seat of Uintah County, home to 32,000 people.

Michael J. McKee, a Uintah County commissioner, said that many local growers recognized that foreign demand for alfalfa helped raise the price for their crop, aiding the county's farm economy. Still, McKee acknowledged he'd heard from a few constituents who want "our land here to be held by American farmers."

On Memorial Day weekend, Shao and Zhang triggered a kerfuffle when they hosted a "Sino-U.S. Alfalfa International Forum" at Escalante Ranch. The timing of the event, which featured more than 30 visiting Chinese dairy leaders, offended some veterans who'd fought against Chinese-supported forces during the Korean War, according to Steven Evans, a local radio station manager who also heads the Vernal Chamber of Commerce. The veterans called the radio station to complain.

"It raised some eyebrows," said Evans, who was quick to note that he and most others in the community have welcomed the ranch's new owners.

The optics of a major Utah farm in the hands of a Chinese company aren't lost on Shao and Zhang. Right up until early May, worried about "exposure," they wavered on whether to let a McClatchy reporter visit the ranch. At the last moment, the 48-year-old Shao agreed to meet a reporter and allow photographs. At one point, he posed for a photo against a backdrop of green fields and golden cliffs with a rainbow above them.

"That rainbow's a good sign," said Shao, who says he dreams of turning part of Escalante Ranch into a year-round lodge for hunters, rafters and outdoor adventurers.

After dragging on his cigarette, he then popped into his farmhouse kitchen, where one of his assistants was preparing a new dinner dish on the Escalante Ranch menu: stir-fried elk meat with garlic and chilies.

McClatchy special correspondent Tiantian Zhang contributed to this report.

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