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Global uncertainty around barley continues

23 October 2019

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Barley has been a topical issue in global agriculture of late and while demand remains solid, there has never been so much uncertainty around the commodity. A range of factors are set to shape the barley market as we head into the new crop season.

Chinese anti-dumping investigation

Late last year, China’s Ministry of Commerce (MOFCOM) launched an anti-dumping investigation into imports of Australian barley into China from January 2014 to September 2018.

The Chinese government is alleging the imports in that period were injurious to Chinese barley growers.

Glencore Agriculture Senior Commercial Manager, Lyndon Asser, said exporters, the Australian Government and grower bodies have worked tirelessly to disprove the claims.

“It’s a credit to the Australian grain industry, the way that all sectors have contributed to the defence,” Lyndon said.

MOFCOM has until mid-November 2019 to declare an outcome to the investigation; however, if needed, they can request a six month extension.

This pending outcome has led to great uncertainty and risk associated with new crop marketing activities, and is forecast to lead to a cautious approach by Australian exporters.

“Unfortunately, we may not have an answer for another eight months, and in this time the Chinese Government can introduce tariffs, security deposits or other measures as they see fit,” he said.

“We are all busy looking for alternative premium markets, but it will be impossible to quickly replace the demand from China for the premium priced malting barley we have grown accustomed to.”

Increased focus on chemical maximum residue limits (MRLs)

The increased global focus on chemical residues is also adding to the uncertainty of the barley industry.

While the glyphosate carcinogen debate has been around for some time, the level of public scrutiny on all chemicals has brought the Clearfield barley varieties Scope and Spartacus into focus.

As Clearfield varieties, growers are permitted to use the chemical family imidazoline (IMI) on Scope and Spartacus to reduce weeds and increase yield.

“This has become an issue as certain destination markets, namely Japan and South Korea, have very tight, or in some cases, no MRLs for these compounds when compared to Australia,” Lyndon said.

With nearly 50 per cent of Australia’s barley crop forecast to be Spartacus, this may create issues with segregations. The combination of its completely dominant production position within two years and lack of real knowledge about how many growers are likely to use IMI during the season has allowed little time for Australian bulk handlers to gain valuable information.

“Managing segregations for these countries is crucial in meeting their allocation of stock, which is making it a difficult task for bulk handling companies in the upcoming harvest,” he said.

“With such a big crop and potentially low or slow market access, there is a supply and demand imbalance which could lead to lower prices for Australian growers.

“This is often the case with new varieties as they can take some time to gain market acceptance.

“Although signs are certainly favourable, Chinese maltsters and brewers will always be cautious about these new varieties while they gain sufficient experience and knowledge.”

Political relationships

The ongoing trade war between China and the US and the escalating tensions between China and Australia are also playing a role in the uncertainty.

“If the trade war continues it erodes confidence in consumer markets,” Lyndon said.

“Although end users will still want the preferred Australian product, they will tend to approach the market much more carefully.”

On a positive note

The recent announcement of the Indonesia-Australia Comprehensive Economic Partnership Agreement, which includes a 500,000MT feed grain quota between Indonesia and Australia, is welcome news.

The partnership is designed to support Indonesia’s requirements for long term food security due to a growing middle class and promote Australia’s feed grains to Indonesia.

“This is the first time Australia has been allowed to import feed grains into Indonesia,” Lyndon said.

“It is great news for Australian growers as it means a new market has been opened up.