Barley Stocks Lowest Since 1981!
Summary - China’s imports began to surge at the start of 2017/18 with low global prices, as a record Australian barley crop drove prices downward. The combination of Australia’s record 2016/17 crop and a free trade agreement with China (effective December 2015) made the feedstuff a lucrative import. Since that period, however, Western Australia’s March FOB prices for barley have surged almost $80/ton (while wheat climbed $50/ton). Ever so, China’s demand has shown little signs of waning but are still fore-cast lower than last year amid tighter global supplies.
As a result of robust global demand and lower world production, ending stocks in all major exporting countries are projected down by year’s end. Current projections have global stocks down more than a third compared to 2 years ago. China’s resurging presence has greatly influenced barley prices since last year, even as they fail to deter its robust imports.
The world barley stocks are tight. A Report issued by IGC noted total barley stocks have reduced 6% in 2017/18 or about 2MMT. World barley ending stocks in 17/18 are projected at 17.9 MMTs, down 4 MMTs from the previous year, the lowest since 1981. World barley stock/use ratios in 17/18 at just 10% are the lowest since 198, 3 and the third lowest since records began in 1960. Large crops must be confirmed before a lasting bear trend is es-tablished in world grain markets.
Saudi –Saudi, three years ago in 2015/16 imported a record 10MMT of feed barley, since then they have been working to re-duce its barley purchases by supplementing feed demand with corn. In 2017/18 it is forecast to import 8mmt of barley
In addition to China, Saudi Arabia’s relatively inelastic demand and the lowest projected global stocks in more than 30 years are also driving prices upward. Saudi Arabia, typically the world’s largest barley importer, is expected to continue its strong presence by accounting for nearly a third of world imports this year.
Barley prices at the mercy of China- In recent times, we saw the start of the rampant of huge demand in 2014-15 came after the Chinese Government banned a type of US and Argentinian corn extract in late 2013, leaving Chinese livestock feed buyers to sub-stitute feed barley and sorghum for corn. However, the Chinese Government has since lifted that ban, made grain import permits more difficult. Last year Chinese authorities also scrapped income support for local corn growers, in an attempt to clear the record corn stockpile. Despite changes to Chinese farm corn subsidies, barley still remained competitively priced against Chinese corn.
Domestic corn prices have remained quite strong despite the government’s attempt to clear their stocks.
China’s imports began to surge at the start of 2017/18 with low global prices, as a record Australian barley crop drove prices downward. The combination of Australia’s record 2016/17 crop and a free trade agreement with China (effective December 2015) made the feedstuff a lucrative import. China’s imports have shown little signs of waning but are still forecast lower than last year amid tighter global supplies.
Mainly on the back of growth in Chinese demand. China’s annu-al consumption in the past 3 years rose to 9MMT, after con-sumption was under 5MMT for the seven years prior. Imported barley was a cheaper alternative for some Chinese end users than buying corn from the country’s internal northern markets. Chinese domestic Maize prices are inflated by the Governments Minimum Support pricing to help drive self-sufficiency in produc-tion (under this policy China has built a large Corn Stockpile). On top of high domestic prices, there is a large freight component to move corn from the Northern China production areas to the Southern feed markets.
From time to time, Chinese authorities use blunt tools to push their domestic end users to use local corn stocks over imported substitutes of barley, sorghum and DDGS. However, in the ab-sence of effective trade policy instruments such as tariffs higher than those allowed under China’s WTO commitment or tariff rate quotas, this is not likely to be possible except for the use of tem-porary trade remedies such as antidumping duties and counter-vailing duties.
Why China’s love affair with Aussie barley (Source Cofco)- Is there a risk that Aussie Barley can be replaced by other ori-gins? The answer is yes, but there are distinct advantages that sees China bias their demand toward Aussie barley. These days we see three distinct Chinese barley markets that are being supplied from Australia all at different specifications and price points. These are Fair Average Quality Malt (FAQ), Malt 1 and Feed barley.
The FAQ market for malting barley has for many years now been seen as a reliable supply source for mainstream low price point brewing demand. With protein and high test weights being criti-cal to our barley making the grade year on year.
On the Malt 1 front, we have seen prices capped with this year given the large amount of Canadian malt 1 production last sea-son. With large Canadian supplies and competitive pricing goes a long way to explaining why we have seen a rally in feed prices while malting prices have remained steady, thus, narrowing the malt feed spread in most zones.
Summary - China’s imports began to surge at the start of 2017/18 with low global prices, as a record Australian barley crop drove prices downward. The combination of Australia’s record 2016/17 crop and a free trade agreement with China (effective December 2015) made the feedstuff a lucrative import. Since that period, however, Western Australia’s March FOB prices for barley have surged almost $80/ton (while wheat climbed $50/ton). Ever so, China’s demand has shown little signs of waning but are still fore-cast lower than last year amid tighter global supplies.
As a result of robust global demand and lower world production, ending stocks in all major exporting countries are projected down by year’s end. Current projections have global stocks down more than a third compared to 2 years ago. China’s resurging presence has greatly influenced barley prices since last year, even as they fail to deter its robust imports.
The world barley stocks are tight. A Report issued by IGC noted total barley stocks have reduced 6% in 2017/18 or about 2MMT. World barley ending stocks in 17/18 are projected at 17.9 MMTs, down 4 MMTs from the previous year, the lowest since 1981. World barley stock/use ratios in 17/18 at just 10% are the lowest since 198, 3 and the third lowest since records began in 1960. Large crops must be confirmed before a lasting bear trend is es-tablished in world grain markets.
Saudi –Saudi, three years ago in 2015/16 imported a record 10MMT of feed barley, since then they have been working to re-duce its barley purchases by supplementing feed demand with corn. In 2017/18 it is forecast to import 8mmt of barley
In addition to China, Saudi Arabia’s relatively inelastic demand and the lowest projected global stocks in more than 30 years are also driving prices upward. Saudi Arabia, typically the world’s largest barley importer, is expected to continue its strong presence by accounting for nearly a third of world imports this year.
Barley prices at the mercy of China- In recent times, we saw the start of the rampant of huge demand in 2014-15 came after the Chinese Government banned a type of US and Argentinian corn extract in late 2013, leaving Chinese livestock feed buyers to sub-stitute feed barley and sorghum for corn. However, the Chinese Government has since lifted that ban, made grain import permits more difficult. Last year Chinese authorities also scrapped income support for local corn growers, in an attempt to clear the record corn stockpile. Despite changes to Chinese farm corn subsidies, barley still remained competitively priced against Chinese corn.
Domestic corn prices have remained quite strong despite the government’s attempt to clear their stocks.
China’s imports began to surge at the start of 2017/18 with low global prices, as a record Australian barley crop drove prices downward. The combination of Australia’s record 2016/17 crop and a free trade agreement with China (effective December 2015) made the feedstuff a lucrative import. China’s imports have shown little signs of waning but are still forecast lower than last year amid tighter global supplies.
Mainly on the back of growth in Chinese demand. China’s annu-al consumption in the past 3 years rose to 9MMT, after con-sumption was under 5MMT for the seven years prior. Imported barley was a cheaper alternative for some Chinese end users than buying corn from the country’s internal northern markets. Chinese domestic Maize prices are inflated by the Governments Minimum Support pricing to help drive self-sufficiency in produc-tion (under this policy China has built a large Corn Stockpile). On top of high domestic prices, there is a large freight component to move corn from the Northern China production areas to the Southern feed markets.
From time to time, Chinese authorities use blunt tools to push their domestic end users to use local corn stocks over imported substitutes of barley, sorghum and DDGS. However, in the ab-sence of effective trade policy instruments such as tariffs higher than those allowed under China’s WTO commitment or tariff rate quotas, this is not likely to be possible except for the use of tem-porary trade remedies such as antidumping duties and counter-vailing duties.
Why China’s love affair with Aussie barley (Source Cofco)- Is there a risk that Aussie Barley can be replaced by other ori-gins? The answer is yes, but there are distinct advantages that sees China bias their demand toward Aussie barley. These days we see three distinct Chinese barley markets that are being supplied from Australia all at different specifications and price points. These are Fair Average Quality Malt (FAQ), Malt 1 and Feed barley.
The FAQ market for malting barley has for many years now been seen as a reliable supply source for mainstream low price point brewing demand. With protein and high test weights being criti-cal to our barley making the grade year on year.
On the Malt 1 front, we have seen prices capped with this year given the large amount of Canadian malt 1 production last sea-son. With large Canadian supplies and competitive pricing goes a long way to explaining why we have seen a rally in feed prices while malting prices have remained steady, thus, narrowing the malt feed spread in most zones.
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