The Australian barley landscape for marketing year (MY) 2023/24 has been fluctuating and shifting, marked by domestic production and international trade dynamics. Previously, July forecasts for Australian barley indicated a considerable decline in production by 30% year-on-year (YoY) to 9.9 million metric tons (mmt) in MY 2023/24 due to lower yields. However, in Sep-23, the Australian Bureau of Agricultural and Resource Economics (ABARES) revised the production estimate upwards to 10.5 mmt, reflecting a 26% YoY decrease.
The correction is primarily due to the contrasting conditions across key barley-producing regions. Favorable rainfall in Jun-23 improved soil moisture conditions and benefited crop growth, notably in areas like South Australia and Victoria, prompting an upward adjustment in production estimates. However, challenges persisted in regions such as Northern New South Wales and Queensland, facing drier conditions that impacted yield. Consequently, despite these revisions, the overall forecasted production for MY 2023/24 still reflects a decrease compared to the previous year.
For international trade dynamics, the previous analysis highlighted the potential for China to re-enter the Australian barley market. A significant shift occurred when China removed the 80.5% tariffs on Australian barley in Aug-23, signaling the end of barley export restrictions and initiating a positive shift in trade relations between the two countries after a three-year hiatus. This removal allowed Australian farmers to resume exporting barley to China, promoting fair competition with other global producers and potentially generating positive economic impacts.
For Chinese buyers, the tariff removal means they can now purchase Australian barley at a reduced cost. Historically, Australia supplied over 70% of China’s barley imports in 2017, making the potential increase in demand for Australian barley in China going onwards.
Figure 1. Top Markets of China's Barley Imports from 2011 to 2023
Contracts were signed for both malting and animal feed barley. China actively seeks alternative domestic and imported grains to replace corn in feed rations. Furthermore, post-tariff removal, Australia exported 428,542 metric tons (mt) of barley to China from Aug-23 to Sep-23, a significant resurgence compared to no exports in 2021 and 2022. This resurgence indicates renewed interest in Australian barley for malting and animal feed, with an anticipated export of around 1 mmt to China between Aug-23 to Dec-23, representing a substantial portion of Australian barley exports for the full shipping year.
Figure 2. Monthly Trends of Australian Barley Export to China from 2020 to 2023
Despite the upward revision in Australian barley production for MY 2023/24, it remains lower than the previous year. With China's demand resuming, Australian barley prices have strengthened. For instance, barley prices in North Coast New South Wales rose by 3% week-on-week (WoW) to AUD 410/mt in W4 Nov-23, and these prices are expected to remain firm through the year-end.
The exportable balance, particularly to China, remains crucial. This suggests a potential revival of Australian barley exports to China, supported by favorable market conditions, possible demand surges, and improved trade relations, fostering optimism in the Australian barley industry for MY 2023/24.