Rollercoaster continues for WA barley market

Rollercoaster continues for WA barley market

Cropping News
Aa

Severe drought across big swaths of Australian agricultural land has supported values and the inevitable ending of the drought (for most) has pressured values.

Aa

BARLEY prices have been a white knuckle ride over the past few seasons.

Severe drought across big swaths of Australian agricultural land has supported values and the inevitable ending of the drought (for most) has pressured values.

Then throw in the shenanigans caused by the current political situation with China, which has dished out a devastating blow in the form of tariffs when importing our barley.

Much time and energy has been spent dissecting what the tariffs mean for our market, but in the end it's a key reason why prices are where they are.

Assuming an average finish, the supply side of the ledger looks solid going into 2021 which is also a driving force behind prices moving lower.

However, it's the demand side that the market is trying to determine and more specifically, where to for our exportable surplus.

If we assume a national barley supply side of about 11.5 million tonne (production and carry-in), this leaves about 6-6.5mt of surplus barley after we account for what we consume domestically.

This surplus can be one of two things - exports or carry-over to the next season.

No matter how you cut it, we're going to have a healthy portion of both, with the main question of how we increase exports considering we're largely excluded from the second biggest buyer globally.

Our prices will ultimately determine how much is exported and how much is carried, with the longer we remain relatively cheap (which we are based on current prices), the more time exporters have to construct their selling programs and in turn the greater percentage of our surplus will be exported.

The bigger the exports, the more support given to our domestic prices as exporters look to cover these sales. Some bright spots have emerged, with Thailand ramping up its Aussie barley imports dramatically this season, which looks likely to continue into next year.

To provide some context, 2019/20 volumes of barley to Thailand are likely to be similar as the previous three seasons combined.

Other countries will step up and take on more Aussie barley than they have in previous years.

However, considering the almost duopoly of barley import demand from China and Saudi Arabia, even this is unlikely to prevent our carry-over stock from ballooning to levels we haven't seen in a long time.

When it comes to the outlook on pricing, although we need to maintain our relative pricing to ensure we are picking up adequate export demand, there's nothing to say we can't move higher if the global feed grain market rallies.

We've also got a spring period to navigate, along with exporters already having sold new crop barley who will be looking to cover in the coming months.

So, there will likely be opportunities to capitalise on rallies as we approach harvest.

Looking further out, a sustainable rally in our prices relative to the rest of the world looks like a challenge, however given the rollercoaster ride of the past couple of seasons, certainly not a foregone conclusion.

Aa

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