French barley prices drop on upcoming China-Australia talks

The basis for French barley against Euronext milling wheat futures has fallen sharply as Chinese buying took a step back ahead of the upcoming World Trade Organisation (WTO) meeting that could potentially bring Australian barley back into the game, traders said Friday.

Market sources reported deals at a €14-15/mt discount to the December Euronext wheat contract on a CPT Rouen basis Friday for new crop deliveries, down marginally from a €2/mt discount trades heard on Monday.

“It has lost €12/mt in a single day,” a France-based trader told Agricensus. “Sellers are nervous because of the next week's China-Australia meeting on trade,” they added.

Destination trading activity was on hold Friday, with the last trade on a CFR China basis reported at $317/mt for new crop shipment in July-August, as “the Chinese are expecting the price to drop,” a European broker said.

Chinese demand had kept prices firm for the last several months, with barley trading in line with 11% milling wheat in France, while the spread with German-origin barley widened as this origin is not approved for exports to China.

Hopes for restrictions lifting of Australian barley exports to China started to rise in the market back in early January 2023 when the Asian giant importer removed the unofficial ban on Australian coal imports.

Unlike coal, a ban on barley imports was officially implemented by the government, as China imposed an anti-dumping 73.6% duty and a 6.9% anti-subsidy duty for a period of five years back in May 2020.

Australia has applied to the WTO to start an investigation into Chinese restrictions, with meeting on that topic expected to be held next week.  

According to Agricensus Export Dashboard, China imported 4.8 million mt of barley in 2022, securing most of the volume from Argentina (2.12 million mt) and France (873,738 mt).

Prior to the restrictions, Australia (1.46 million mt) was in the top-five barley exporters to China, alongside Ukraine (2.57 million mt), Europe (1.96 million mt) and Canada (1.95 million mt), with a total of 7.98 million mt of the grain imported in 2020.