Article Summary
The US alfalfa hay has a high demand in China. The high protein content of the hay has made it quite a preferred feed for the cows among the dairy owners in China. Almost half of the alfalfa hay produced in the US is shipped to China. The exports of alfalfa hay to China had reached 785,000 tons in 2013 . But the exports have received a severe blow in recent times. The Chinese authorities have found the imports of hay from USA to contain a genetically modified strain of alfalfa which has not been approved by the government of China. The stringent action by China has led to the fall in exports of alfalfa hay to China. The exporters are now making sure that the shipments do not contain the genetically modified strain of alfalfa hay. This has drastically slashed down exports of the hay to China. The domestic supply of hay has increased in the US leading to sharp fall in price of hay by 12 percent and fall in income for the hay producers and exporter.
The exporters of hay from the US have asserted that they purchase the hay only from those farmers who grow the non-GMO variety of the hay. Two problems have occurred in this context. First, it is clear that China has a stricter definition of biotech products that are restricted in the country. Secondly, the GMO strain has got mixed with the non-GMO strain through cross-pollination. Around 30 percent of the alfalfa seeds sold in the US are the biotech varieties produced by the Monsanto Co . The seeds are robust to weedkiller sprays. The biotech variety was introduced in the US in 2011 among dissent from several quarters as there were apprehensions that this strain could contaminate organic alfalfa through pollination. This fear seems to have come true now.
In the figure below we show how the fall in exports of alfalfa hay has increased domestic supply of the hay and thus the price has come down. The increased supply is shown by a rightward shift in the supply curve from S0 to S1 leading to a fall in price from P0 to P1.
P0 S1
P1
Q0 Q1 Q
Works Cited
Newman, Jesse. "China's hardline on Biotech Burns U,S, Hay." The Wall Street Journal 14 December 2014. English.
Pindyck, Robert and Daniel Rubinfield. Microeconomics. 7th. Prentice Hall, 2009. English.
