Export

Tariff talk stalls Australian barley sales to China

Henry and Liz Wells, May 11, 2020

Harvesting barley in November 2019 at Cascade near Esperance, WA. Photo: Paul Carmody

WEEKEND news that China is considering putting hefty tariffs on Australian barley has halted any writing of new business into Australia’s biggest barley market for current and new-crop business.

If implemented promptly, tariffs payable by Chinese importers could affect two cargoes from Western Australia already on the water.

See below for industry and government responses

The Australian grains industry and the Federal Government are currently pulling out all stops to dissuade China from imposing tariffs on Australian barley as the wind-up to its anti-dumping investigation which started in late 2018.

China’s investigation has looked for evidence of injurious dumping as defined by World Trade Organisation rules, and sources have told Grain Central it has mulled over submissions from around 40 Australian barley exporters.

They were made in February last year, and are believed to cover a period of investigation from 1 January 2014 to 30 September 2018.

Low Australian stocks

If one or two tariffs are imposed, a mitigating factor in the near term will be the fact that Australia’s export surplus of barley yet to be priced is historically low.

This is a function of the drought in eastern Australia, which has diverted a big chunk of the South Australian and Western Australian crops away from export as domestic maltsters and feedgrain users paid a premium to keep grain at home.

Also, the March dive in the Australia dollar to its lowest point in more than 10 years saw a whack of export grain business get written, much of which has already been shipped.

Cloud over new-crop

Soaking rain in New South Wales means that state is likely to supply its own and some of Queensland’s feedgrain demand.

It means SA, WA and Victoria are likely to have big export surpluses of grain to shift from December onward.

If China is not in the market, barley’s discount to wheat will widen from the typical 15-20 per cent.

Valued market

Since the 1990s, Australia and China have built a strong relationship around barley.

China often buys around half the barley Australia exports.

Based on the latest data from the Australian Bureau of Statistics, that has been the case between 1 December and 31 March, with China buying 628,140 tonnes of the total 1.3 million tonnes (Mt) of barley shipped to all destinations.

Projections about Australian barley exports in the current crop year put sales to China at 1.5Mt, compared with around 4Mt in an average year of Australian production.

Going on current climate forecasts and the start to the season so far, the Australian crop now being planted appears to be able to support shipments of that size to China.

Preferred for malting

China’s modern malting plants have an intrinsic preference for Australian barley.

They have been designed for maximum efficiency using barley with physical and processing characteristics readily available from Australia.

Its low moisture and consistent quality make Australian barley malt with characteristics familiar to barley technical specialists in China’s malting and brewing industries.

Trade sources have told Grain Central that consumers in China are likely to be just as alarmed as Australia when it comes to the prospect of a tariff on Australian barley, and may seek exemptions from the Chinese Government.

Feed demand factor

China’s demand for feed barley, especially in its southern regions, is considerable.

Consumption comes from China’s dairy and beef sectors, which are users of China’s own barley and corn crops, or imported products.

Trade has dwindled in recent years due to big Chinese stocks of corn, but the market can be an important one for Australian feed barley exporters.

US sorghum comparison

In early 2018, China announced an investigation into United States sorghum which prompted the Chinese Government to impose an import duty of 178.6 per cent on the grain.

The move caught up to 20 cargoes of US sorghum on the water. Destinations other than China absorbed the US export surplus prior to China terminating its anti-dumping case against the grain.

The duty was in place for a few months, and had a short-term impact on feedgrain values in parts of the global market.

Further factors

China and Australia do not always see eye to eye when it comes to issues including human rights, or Chinese activity in the South China Sea.

The precarious relationship between the US as a long-term ally of Australia and China may have some effect on China’s response to historic pricing of Australian barley.

Inflaming this is the US line that China constructed the COVID-19 virus.

Aside from all this, Australian barley growers and exporters are hopeful that China’s decision finds in their favour as being an open and accountable source of grain.

Statements

“As part of the Australian barley industry, CBH has received information from the Chinese Ministry of Commerce (MOFCOM) that tariffs on Australian barley are likely to be imposed as a result of its ongoing anti-dumping and countervailing duties investigations.

If they are to go ahead, the tariffs will have a significant impact on Western Australian growers by reducing the competitiveness of Australian barley into the Chinese market, and we have seen barley prices come off already on the back of this news.

CBH will continue to co-operate with the Chinese Government and work closely with the Australian Government in hope of achieving a better outcome for our growers and customers.

While we have a long and valued relationship with our Chinese barley customers spanning over 50 years, we have been working hard to establish and strengthen other barley markets for WA growers.

These markets include Japan, Vietnam, Thailand and India for malt barley, and Japan, Thailand, United Arab Emirates and Saudi Arabia for feed barley.”

CBH chief marketing and trading officer Jason Craig

 

“The Australian Government is deeply concerned by reports that unjustified duties may be levied on Australian barley imports into China.

Our barley producers operate in a competitive global market without any trade distorting subsidies and price their products in an entirely commercial way.

We have worked with the Australian grains industry to mount the strongest possible case against China’s anti-dumping investigation. We will use the remaining time before China finalises its decision to continue our efforts to resolve this matter satisfactorily and will seek to uphold the integrity of our world leading barley producers.

Whilst Australia respects China’s right, as with any nation, to undertake domestic investigations into anti-dumping matters, we do not accept that there is a prima facie case, let alone a conclusive case, to find dumping by or subsidy of Australian producers.

Australia will reserve all rights to continue to defend the interests of our barley producers.”

Australian Minister for Trade Simon Birmingham

 

“The Chinese Ministry of Commerce’s proposal to impose tariffs on Australian barley is a major blow to WA farmers.

Western Australian barley exports to China were valued at $805 million in 2018-19. Around 88 per cent of Australia’s barley exports to China come from WA.

This is an important market for WA growers, with no ready alternatives. We know that WA malting barley is highly valued by brewers in China, who will no doubt be disappointed if this proposal proceeds.

Seeding is just underway across the WA grain belt – the timing could not be worse for our growers, who have little to no time to reassess their options for the season.

The Western Australian Government has always maintained good relationships with China as our major trading partner, and we will be making direct contact with the Chinese Consul General on the matter.

The State Government will urge the Australian Government to work closely with the Chinese Ministry of Commerce to find a fair outcome for our growers.

“We strongly believe there are no grounds for the claims that Australian barley is being dumped or subsidised in the Chinese market.

“Australian barley exporters and the Australian Government have been provided 10 days to respond to the decision.”

WA Minister for Agriculture Alannah MacTiernan

“The Australian barley industry understands the People’s Republic of China, Ministry of Commerce (MOFCOM) are potentially proposing to place tariffs on barley imported from Australia as a result of their ongoing anti-dumping and countervailing duties investigations.

The yet-to-be-finalised tariffs may include a dumping margin of up to 73.6pc and a subsidy margin of up to 6.9pc for barley imported from Australia.

Australian barley exporters and the Australian Government have been provided with 10 days to respond. It is understood MOFCOM may provide their final determination on, or before 19 May 2020.

The organisations making this statement and Australian barley exporters will continue to co-operate with the Chinese Government and work closely with the Australian Government.”

Joint statement from Grains Industry Market Access Forum, Australian Grain Exporters Council, GrainGrowers, Grain Producers Australia and Grain Trade Australia

 

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