Feedgrain Focus: Barley dives ahead of China tariff decision

Liz and Henry Wells, May 14, 2020

Barley prices have been impacted by reduced demand from some domestic and export maltsters as well as China’s talk of tariffs. Photo: Malteurop Geelong

PRICES for new-crop barley have fallen by $30-$40 per tonne this week, mainly on news that China is considering putting a massive tariff on Australian barley.

A decision from Australia’s biggest market about a tariff is due by Monday,  and trade in nearby and new-crop positions has slowed to a trickle for wheat and barley ahead of the expected announcement from the Chinese Government.

Concerns that Australia’s barley exports to China will halt in the near-term in response to a tariff have increased pressure on grain prices which were already softening based on Australia’s healthy outlook for new-crop production, and easing demand from feedlots and maltsters.

Sources have told Grain Central some barley booked for feedlots and malting in domestic and overseas plants was already being diverted into the feed market as beef and industrial beer demand languishes in response to COVID-19.

A cargo of barley for China is now due to load on the MV Tomini Felicity in South Australia, while the MV African Arrow and MV Federal Innoko are already on their way.

Far from freefall

Dry conditions in Queensland and a patchy start to the Western Australian growing season are expected to put a floor in wheat and barley values as they approach export parity.

Wheat’s price falls have been modest at $15-$20/t from last week, with the northern market reflecting continued dry conditions which are limiting planted area in southern and central Queensland.

It shows signs that Australian grain pricing is disconnecting from the drought-driven domestic market which has dominated trade since late 2017.

Delta Agribusiness general manager grain division Mick Parry said new-crop wheat at around $310/t Newcastle was only $5.50/t over Chicago Dec futures.

“Basis is weak, and we’re not that far from international values,” Mr Parry said.

Australia’s unpriced barley and wheat tonnages are believed to be minimal following a flurry of sales which took place when the Australian dollar dived in March to long-term lows.

Mr Parry said up-country prices for nearby barley have fallen around $15/t, with free-on-truck prices at port down more like $20/t, while wheat markets have dropped by as little as $10/t.

“On barley, it’s all about China.”

Sources have told Grain Central the drop in barley prices means Australia could now price feed barley into Saudi Arabia, which traditionally puts the floor in the world barley market.

They have also said barley’s price drop will encourage some growers to switch barley area to wheat, canola or pulses, particularly as barley in NSW and Victoria is sown when conditions remain dry into June.

This is not the case this year.

“From the south of Moree all the way to Geelong looks great.”

“Growers have been looking at old-crop barley being priced at $80/t under wheat, and they were leaning towards more wheat anyway before the China news.”

Most growers in Victoria have finished planting their winter crop, or are within days of completion, while most NSW growers expect to be done by the end of the month if rain does not slow them up.

This week Last week
Barley Downs June-July $345 $375
Barley Downs Jan $242 bid $250 offer $282
Barley Melbourne nearby NQ $295-$300
Barley Melbourne Jan $240 $265-$270
Sorghum Downs Jun-July $390 $410-$415
Wheat Downs July $435-$440 $455
Wheat Downs Jan $310 $330
Wheat Melbourne nearby $375 $385
Wheat Melbourne Jan $300 $315-$320

Table 1: Indicative delivered grain prices in AUD per tonne.

Riverina-based trader Richard Gale at GrainLink said barley was so cheap it would be buying demand.

“At a $100/t discount to wheat, it’s amazing how much demand it can buy, and the wheat market’s been quite resilient,” Mr Gale said.

Victorian growers who had a good harvest last year, and can expect another one, could put some supply-side pressure on the market as they reduce their stocks into a softening world market.

“I can see wheat falling $30/t quite comfortably, and growers are starting to sell a bit.”

In South Australia, Long Seed & Grain principal David Long said growers were around halfway through planting, and little interested in forward selling grain.

“The whole market’s dead.

“The Mid North and Yorke Peninsula grow a lot of malting barley, and they probably won’t change their rotations too much because of the China issue.

“I don’t think it will affect planting.”

Sorghum shrinks

The central Queensland sorghum crop which was forecast to yield 300,000t is now likely to produce around half that due to the dry finish, while the southern Queensland crop might yield 50,000t.

Light test weights and high screenings, a symptom of a lack of in-crop rain, are downgrading some sorghum now being harvested, and growers are loath to forward sell until they can be sure of quality. Link to the Grain Trade Australia sorghum trading standards summary chart, for example.

Most of Queensland’s sorghum crop will be harvested next month, as cooler temperatures and shorter days have slowed the road to harvest at acceptable moisture levels.

ASX mirrors barley drop

Severe turmoil affecting barley pricing this week dragged barley ASX futures around 15 per cent lower, while wheat futures declined by around 3pc.

Bid/offer spreads in all markets widened on news the finalisation later this month of China’s investigations into alleged feed barley dumping and countervailing duties action could result in tariffs being applied to all barley exported from Australia to China.

July 2020 feed barley ASX futures on Wednesday settled at $255/t, 17pc lower than the $298/t price a week earlier. The January 2021 and 2022 barley contracts, both 13pc lower, settled yesterday at $225.50/t and $238.20/t respectively.

East coast (WM) wheat current-crop contracts traded higher then lower, the July 2020 contract yesterday settling at $369/t, practically unchanged from a week earlier.

Yesterday’s January 2021 wheat settled at $305/t and January 2022 finished at $306/t, $10/t and $12/t lower than the week prior.



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