INTERNATIONAL trade wars are and will continue to have a significant impact on Australia's barley industry.
That's what CBH Group senior barley trader Drew Robertson told the audience at last week's Australian Barley Technical Symposium at the Westin Hotel, Perth.
Mr Robertson said an increase in geopolitical uncertainty needed to be considered as a backdrop for Australia's barley industry future markets and trading.
"We're seeing an increasingly protectionist trading environment around the world and anticipatory buying disappear," Mr Robertson said.
"Historically it wouldn't have been unusual for us to see demand and be selling three to six months in advance, but more recently with economic and financial uncertainty, we're seeing buyers deploy a much more hand-to-mouth buying scenario and as a result they're only buying one to two months in advance of their requirements."
Mr Robertson said this change in buying was putting a lot more pressure on supply chains to supply grains on a just-in-time basis.
With about 70 per cent of Australia's barley going overseas, Western Australian Agriculture and Food Minister Alannah MacTiernan said international markets were critical for the success of Australia's barley industry.
"Australia provides about one third of the global malting barley that's traded annually and about 20pc of the feed barley trade," Ms MacTiernan said.
Over the past five years, international trade of barley has been about 27 million tonnes on average and Australia has provided just under 6mt of this to the international barley market.
During this time the average production of Australian barley has been about 9.8mt, making Australia third on the list of global barley producers in the world, behind Europe and Russia.
Mr Robertson said Australia's barley industry had seen a lot of advancements in genetics and agronomics in recent years, with yields improving significantly over the past 45 years and was one of the few regions where barley production had continued to increase.
"In WA, barley is becoming an increasingly important part of our overall commodity mix," Mr Robertson said.
"Evidence from growers about how profitable barley is, is driving the adoption of it.
"When we took the average yield of barley versus wheat over the past three years and multiply that with the average grain prices for wheat and barley over the same period, we found that barley was a more profitable option for growers to the tune of about $40-50 per hectare," Mr Robertson said.
In 2010, barley was about 18pc of WA's grains production and wheat was just under 70pc, but fast forward to last harvest, barley represented about 30pc of the overall commodity mix in WA, with the increase coming largely at the expense of wheat.
Mr Robertson pointed to China increasing its imports of feed barley as another significant driver for the increase in WA barley production.
With China receiving about 71pc of Australia's barley exports and almost 80pc of Australia's malting barley exports, he said the country had been a consistent importer of large volumes of barley since the 2013/14 season.
"When China started using barley in their compound feed ration they were pricing it as relative to their domestic corn price, so this fundamentally changed the way barley was priced and made feed barley a much more attractive and profitable option for growers," Mr Robertson said.
"China only needs about 3.8mt of imports to cover their malting and brewing industries, any imports above that level is purely for feed."
However Ms MacTiernan said it was important for Australia to have a range of markets and not become dependent on just one.
She identified new markets including Japan, Vietnam, India and Indonesia as growth areas for Australia's barley product.
"Japan is already taking about 15pc of our exports and other new markets, in particular Vietnam, is becoming one of the largest and fastest beer growing markets in the world, as well as having an expanding feed market," Ms MacTiernan said.
"Currently Vietnam buys Australian barley for quality, proximity and availability, so we see Vietnam as a very natural new market for Australia to focus on.
"We've also identified the Indian market as one that is important, with their domestic demand for beer growing at a compound annual average rate of 10pc."
New options have also opened up for Australia's grain growers in Indonesia since it became part of a free trade agreement with Australia in March this year.
"Indonesia has already agreed to import 500,000t of grain, tariff free, with a long term outcome of 5pc annual growth," Ms MacTiernan said.
Mr Robertson said global beer consumption would not be increasing in huge amounts in the future and as a result, demand for malting barley was unlikely to increase significantly.
However a trend of increasing premiumisation of beers could lead to slightly higher malt inclusion, resulting in possible incremental increases in malting barley demand in the future.
"From my perspective it really is going to be the demand for feed that's going to be driving the demand for barley in the future and providing that outlet for the barley that's produced in WA," Mr Robertson said.
"WA is going to be increasingly an export State and we're going to need to make sure we're focusing on these feed markets where the forward projections are for significant growth in the next ten years."
He said the main concerns buyers had identified in the Australian barley industry are a rapid turnover of our varieties, low protein levels, increasing concerns around the increase in the level of foreign material as well as increased pre-competitive collaboration of other markets.
"Just as a barley variety becomes preferred it disappears from production and we need to think about the future role of heirloom varieties and varieties that are developed in conjunction with brewers, and what role they may play in the future," Mr Robertson said.
With consistent feedback that protein levels of Australian barley are too low, he said there had been some improvement in that area, however there was an increasing concern around the increase in the level of foreign material and husks in Australian barley.
"I'm not sure if this is a seasonal issue, varietal issue or mechanical issue at this point in time but it certainly is an area of focus," Mr Robertson said.
"The final issue is greater collaboration and increased pre-competitive collaboration and certainly the work we're doing in other markets is helping to drive that pre-competitive collaboration between malting and brewing industry and the Australian industry."