AUSTRALIA’S new-crop barley exports have been forecast at 3.8 million tonnes (Mt), up from 3.2Mt in 2019-20, according to the July report from the USDA’s Foreign Agricultural Service (FAS) Canberra posting.

The report forecasts new-crop Australian barley production at 9.8Mt, 200,000t below the latest average of Australian industry estimates.

Australia’s overall feed consumption of grain is expected to fall as the Australian beef industry enters a period of herd rebuilding, and increased pasture production has reduced the need for on-farm grain feeding.

Following is a summary of the report’s barley and wheat sections:

Barley

The May announcement by the Chinese Government that a five-year, 80.5 per cent, tariff was to be imposed on Australian barley was seen as forcing barley prices down, but did not cause a major change in new-crop area because it came at the tail end of the planting window.

In light of the impact the Chinese tariff is expected to have on exports of malting barley, some growers in areas with adequate in-crop rainfall may opt to forego trying to achieve malting grade and instead try to maximise yields by applying nitrogen.

Domestic consumption of barley is forecast to increase slightly in 2020-21 to 5.6Mt from 5.5Mt in 2019-20.

Food, seed, and industrial consumption is forecast to remain steady, with malt production also expected to be relatively stable.

Livestock feed consumption, however, is forecast to be strong as the tariffs by China will likely result in barley continuing to displace wheat in feeding.

Over the past five years, around 40pc of Australian barley exports to China have been malting barley.

Japan is Australia’s second-largest barley export market, and in years with big export surpluses, China has imported most of Australia’s excess feed barley.

The industry is working towards seeking alternate markets due to the expected decline in barley demand from China.

Some potential markets for feed barley are in the Middle East, although there are fewer options for malting barley. China accounted for 88 percent of Australia’s malting barley exports in recent years, which will create future challenges for the industry.

Australia’s barley stocks are forecast to increase in 2020-21 to 2.6Mt from 2.2Mt in 2019-20.

This is due to the forecast larger crop and export market challenges caused by the China tariff on Australian barley.

Wheat

Australia’s new-crop wheat production is seen at 27Mt, with wheat exports forecast at 17.5Mt, up from 9.2Mt in 2019-20.

Domestic consumption of wheat is forecast to decrease to 7.05Mt in 2020-21, a 16pc reduction from 8.4Mt in 2019-20, largely due to a forecast decrease in feed industry demand.

After two years of drought impacting much of the beef cattle industry, improved rains have resulted in restocker demand for cattle to rebuild the size of the national herd.

This has resulted in a significant decline in feedlot cattle and therefore reduced grain demand for feedlot rations.

Improved conditions since early 2020 have greatly increased pasture production and decreased on-farm supplementary feed demand from both beef and dairy industries.

A further important impact on the demand for wheat from the livestock sector has been the widening price gap between wheat and barley.

This was caused by China’s imposing of a hefty tariff on Australian barley, and subsequent fall in barley prices.

While the price spread between wheat and barley in the preceding six months was in the order of AU$60 per tonne (US$42/t), in May after the tariff announcement this widened dramatically to around AU$140/t (US$98/t).

It has since moderated to about AU$100/t (US$70/t).

Wheat is generally a favoured grain over barley to include in feedlot rations, but the increased price gap has resulted in many sectors switching almost entirely from wheat to barley.

Domestic consumption for flour milling is forecast to largely remain unchanged at 3.55Mt in 2020-21, a modest increase from 3.5Mt for the previous two years.

Consumption of wheat for flour has typically only been increasing with population growth.

Recently, the impact of COVID-19 has caused a short-term ramp up in flour milling, as mills boosted production to provide flour for consumers stocking up on supplies. Conversely there has been a negative impact on the food-service sector caused by restrictions implemented by federal and state governments. The overall change in domestic demand for flour milling wheat, is forecast to be minimal.

Australian ending stocks are forecast to increase in 2020-21 to 6.39Mt as a result of larger supply and strong global export competition, while 2019-20 ending stocks are estimated to be at the lowest levels in more than a decade due to low production

Source: USDA FAS Canberra