Australian Barley Takes a New Course

The USD 252 billion trading relationship Australia had with China was nearly decimated in the face of the ongoing spat between the two countries. Several of Australia’s flagship agricultural goods, including beef and wine, have already been restricted in the Chinese market. Barley, Australia’s prime agricultural export, was not exempt and has been slapped with an 80.5% tariff in May of 2020, pushing Australia to no choice but to search for other markets such as Mexico and Saudi Arabia in order to make up for the deficit.

To mitigate further risks in damaging export prospects for barley, Australia is making strides in order to diversify its market, where several countries have stepped up to take advantage of the lowered prices.

Aussie Barley Prices Drops

Australia and China had a strategic yet strained relationship, as Australia relies on more than 30% of its exports on Chinese spending, but due to the sheer amount of barley exports from Australia, barley has been subject to an anti-dumping investigation from China in 2018. Prices for barley have been on the high side: in taking a closer look at feed barley prices, despite the slight dip after the announcement of the investigation, it has been increasing as the severe drought has plagued crops.

After the tariff imposition, however, barley prices decreased, which was also added by reduced domestic demand and improved production. Currently, Australian barley prices stand lower against the rest of the world, which on one hand, will eat away farmer’s margins, but on the other hand, has allowed Australia to become attractive to other markets.

Source: ABARES, DPI

Mexico and the Middle East Opens Up

With Australia barley ready for business in other markets, Mexico was viewed as an optimal market as the fourth-largest beer-producing country in the world. With the support of the CBH Group (Co-operative Bulk Handling), the primary grain export group of Australia, 35,000 tons of malt-barley were shipped to Mexico for the first time. Demand was present in the Middle East as well, with top importer Saudi Arabia opening its doors for Australian barley as well after Russia, its main provider decided to set export taxes on barley in light of high inflation. According to Bloomberg, Saudi Arabia’s feed barley imports are expected to be over 2 million tons in 2019-20 from virtually none. Southeast Asian markets - Thailand and Vietnam, are also expected to increase in feed barley imports from Australia by twice as much in 2020-21. The beginning of these imports will set a precedent for Australia to be less reliant on the Chinese market alone, a badly needed course of action as Canada and France have quickly filled in Australia’s shoes to meet Chinese demand.

Sources

• NSW Government. Barley.
• Bloomberg. “Australia Ships First Barley to Mexico in Hunt for New Markets.”
• Financial Review. “Australian barley farmers tap Mexican beer makers.”