Weather conditions across Australia are always a talking point at this time of the year as we enter the critical maturity phase of the winter crop. Quite often it is the lack of rainfall that has the tongue’s wagging. However, this year the fear is the tap won’t turn off and there is already talk of waterlogged crops and lost production.
This situation usually means the more marginal cropping regions of Australia are having ideal seasons and that certainly appears to be the case this year. At this stage it would seem that any lost production is more than being made up for in the lower rainfall zones, many of which are having a cracking season.
Traditionally these regions have a higher proportion of their winter cropping area sown to barley than the higher rainfall zones. And whilst barley planting nationally is down a little compared to last year, the ideal growing conditions are seeing production estimates topping 10 million metric tonne (MMT). It even has the potential to exceed the previous record of 10.4 MMT set in 2003/04.
A crop of that size obviously means exports would need to increase compared to the current season. The question then becomes who are we competing with and can it increase enough to close out the next marketing year without a burdensome increase to the Australian carry out?
Globally, we have seen a mixed bag this year with Ukraine production up around 1MMT, Argentina is expected to be down by a similar quantity, while the French crop is much smaller than last year due to the excessive wet whilst the crop was filling and into harvest. There has been talk of the French having to import malting barley, while their feed barley is being consumed domestically, as it is the cheapest feed grain and much of the quality doesn’t meet export market specifications.
The Canadian crop has been looking good with production forecast to increase by 1 MMT year-on-year, but like France, they have been hit with torrential rain over a sustained period in recent weeks, leading to a delay in their harvest and concerns over quality and quantity.
The Russian crop is interesting with production estimated to be higher than last year at around 18.5-19 MMT, however, the pace of their export program has been extremely slow. Russian wheat is the cheapest in the world at the moment and the export focus has certainly been on moving the wheat crop at the expense of barley. This will mean that their barley will most likely be competing with Australian origin in the New Year.
In contrast, the Ukraine have been pushing their barley out of ports as quickly as possible, with more than half their anticipated export program already shipped in the first two months of the 2016/17 season. Ukraine barley has been the cheapest in the world and has been filling a substantial proportion of Saudi Arabian demand as they attempt to complete much of their export program before the northern winter sets in and the Australian and Canadian crops come on line.
China will most likely be the best hope for Aussie exports in the early part of the marketing program. This will certainly be the case for malting barley with the poor quality French crop and potential Canadian issues. However, Saudi Arabian demand will certainly be required in the course of the next twelve months with such a big Australian crop on the horizon.
Source: Nidera Australia Weekly Market report: Peter McMeekin is Nidera Australia’s Origination Manager.