Guess which costs more: far away by ship or close by truck?
Milk-cow-quality alfalfa hay is already over $300 per ton in California which isn't making this a fun summer for dairy producers there. An article last week by Bloomberg news isn't going to make them any happier.
It said that loading bales onto a ship and sending them from California to China actually costs less per ton than putting them on a truck and driving them to dairies a few hours north.
On the surface, the math looks insanely out of whack. From the Port of Los Angeles to Hong Kong is about 7,340 statute miles. It takes two to three weeks for a ship to get there. From Los Angeles to the central San Joaquin Valley is about 175 miles; it takes a truck three or four hours to get there.
Incredibly, shipping by ship costs less. Sort of. The president of a hay-exporting firm in California's Imperial Valley says shipping to China runs about $33 per long ton. Trucking to Tulare, however, costs about $54 per ton.
But the article doesn't mention a few things that probably understate the as-delivered cost by ship. Hauling the hay to the port also costs something, as does loading it onto the ship. Once the ship arrives, the hay also needs to be unloaded and hauled to the Chinese farm that bought it. Add it all up, and we bet the total prices are pretty close.
Still, it's yet another example of just how small the world has become and why competition extends far beyond your local neighbors.