Australia’s farmers stick with barley planting despite China fears

Farmers in Australia look set to maintain barley planting acreage in the country despite fears that a trade spat with China will slash regional demand, market sources told Agricensus Friday.

Some anticipate the area may even increase as oilseeds plantings are hit by drought, bolstering the area planted with barley despite the backdrop of an ongoing Chinese anti-dumping investigation.

“The acreage has not dropped; it’s expected to increase,” one Australia-based barley exporter said, adding that “rapeseed acreage will decline,” as drought conditions mean farmers have missed the ideal planting window.

Other sources have said that they expect the ratio of wheat and barley in the overall plantings to remain as ‘normal’, with no reduction or increase.

Planting has just started, but with widespread rains reaching the country and alleviating drought conditions, the pace is expected to pick up, the exporter added.

The move is unexpected as ongoing trade issues with China has slashed export interest and seen a lack of reported barley sales to that destination.

Only 400 mt and 31,351 mt left Australia bound for China in November and December 2018 respectively, down sharply from nearly 300,000 mt and 331,300 mt that left in the same two months of 2017.

Disaster

China has been the main buyer for Australian barley in recent years, with 61% of the 6.82 million mt of barley imported in 2018 sourced in Australia, according to China’s customs data, and a fall in demand would potentially be devastating.

“It would be a disaster if China treats Australia like Canada. Our barley growers really do not realize how cheap their barley would be if China does not buy it”, a second source said, referencing a similar trade dispute that has hit Canada’s agriculture exports to China.

In lieu of China buying Australian barley, and with a similar planting outlook to last year, the country’s exporters will have to find other markets to sell into, with attention focused on Middle East buyers such as Saudi Arabia - the world's biggest importer of barley.

“(The extra production) will likely be used to replenish low national stocks, and to be exported to the Middle East,” the second source said.

But with fierce competition in the world market, selling to Saudi Arabia in particular will mean the grain has to price competitively, which is far from what farmers usually want.

“I think that we are pricing about $10-15/mt above Saudi's last purchase,” a trader said.

“Domestic demand has to price at a premium to export parity. If domestic demand goes away then prices might drop $20/mt, that's still not going to discourage farmers from planting,” the trader added.