AUSTRALIA may be facing a record in barley, as well as wheat — depending how significantly rain has helped, rather than hindered, the crop — potentially presenting a challenge for merchants negotiating a transformed world market.
While commodities bureau ABARES has downsized the nation’s barley sowings this year by 50,000 hectares to 4.05m hectares, Nidera Australia is expecting a healthy rise in volumes.
In essence, Australian barley output could defy the drop in sowings: “Whilst barley planting nationally is down a little compared to last year, the ideal growing conditions are seeing production estimates topping 10m tonnes,” said Peter McMeekin, origination manager at the grain merchant.
Apart from being a 13-year high, that would be well above the 9.03m-tonne crop expected by Abares — which is expected next week to revisit its forecasts — as well as beating forecasts from other leading commentators.
The International Grains Council pegs the crop at 9.6m tonnes, while the US Department of Agriculture foresees a 9.4m-tonne harvest.
May beat the record
This year’s harvest “even has the potential to exceed the previous record of 10.4m tonnes set in 2003-04,” Mr McMeekin said, flagging the boost to yield prospects from ample moisture in major growing areas.
While acknowledging that “there is already talk of waterlogged crops and lost production” in some areas, the rains nonetheless would appear to represent a large net benefit.
Ample rain “usually means the more marginal cropping regions of Australia are having ideal seasons and that certainly appears to be the case this year.
“At this stage it would seem that any lost production is more than being made-up for in the lower rainfall zones, many of which are having a cracking season,” he said, adding that drier areas tend to have more winter cropping area sown to barley than higher-rainfall zones.
Good, but not stellar
However, Melbourne-based analysis group, Grain Information Services, is taking a more cautious assessment, flagging that conditions in the southern states of Western Australia, South Australia and Victoria — key to barley results — have been “closer to average” than in the north east.
“The point here is that crop conditions are good, but that doesn’t mean they’re stellar,” said James Fell, chief analyst at Grain Information Services.
“If spring is fantastic, the outlook could change.”
The group was pegging the crop at about 9.0m to 9.5m tonnes, said Mr Fell, a former International Grains Council analyst, adding that “if barley plantings are down, that just reinforces the idea.”
Trade map transformed
There are changing dynamics in the world barley market, thanks to unusual forces in both key importing and exporting countries.
Australia uses only a minority of its crop domestically, typically shipping some 5m to 6m tonnes a year, with the record of 6.4m tonnes set in 2003-04, after the record harvest.
As a particularly key export market for Australian barley, China is cutting purchases as its feed merchants turn to corn — with which prices have been depressed by a subsidy shake-up and the release of corn supplies from state stockpiles.
Chinese imports of barley fell by 62 per cent to 2.55m tonnes in the first seven months of 2016, including a 49 per cent drop to 1.78m tonnes in purchases from Australia, customs data shows.
Barley versus wheat
Meanwhile, on the export side, EU shipments have made a poor start to 2016-17 after a disappointing harvest in the bloc’s top producer, France, with volumes so far this season down 63 per cent at 1.02m tonnes, according to European Commission data.
Exports by France itself fell by 24 per cent to 715,132 tonnes in July, the latest month for which data are available.
Meanwhile, USDA staff in Moscow curbed expectations on Russia’s barley exports, citing the competition with a huge wheat crop for transport and storage space.
Mr McNeekin said “the pace of their (barley) export program has been extremely slow.
“Russian wheat is the cheapest in the world at the moment, and the export focus has certainly been on moving the wheat crop at the expense of barley.”
By contrast, Ukraine shippers “have been pushing their barley out of ports as quickly as possible —with more than half their anticipated export program already shipped in the first two months of the 2016-17 season,” Mr McNeekin said.
“Ukraine barley has been the cheapest in the world, and has been filling a substantial proportion of Saudi Arabian demand as (Ukraine merchants) attempt to complete much of their export program before the northern winter sets in and the Australian and Canadian crops come on line.”
Kiev-based UkrAgroConsult has forecast Ukraine shipping a record 40.7m tonnes of grains overall in 2016-17, up from 38.5m tonnes last season.
“A reduction of wheat shipments will be offset by increased corn and barley exports. Most likely, monthly grain exports will set a new record at the season’s peak,” UkrAgroConsult said in a briefing two weeks ago, as it raised by 600,000 tonnes to 9.6m tonnes its estimate of the Ukraine barley harvest.
Mr McNeekin added that orders of Australian barley from key Saudi Arabian importers “will certainly be required in the course of the next 12 months with such a big Australian crop on the horizon.”
From AgriMoney and other sources.