Farm Tender

Malt Barley demand increases slowly

  • By: "Prime" Ag News
  • Cattle News
  • Jun 03, 2020
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By Ben Cotsford - AWB

The past two months has been a whirlwind ride moving grain markets $50-60mt for the 20/21 season with several different factors influencing markets. This has presented some great opportunities for Australian grain growers over this period presenting opportunities to forward sell into prices that are rarely seen prior to the commencement of seeding.

Some of the main drivers on grain markets good and the bad over the past month include:

  • World markets rallying rapidly in reaction to COVID-19 (panic buying)
  • AUD drop from 70c to as low as 55c currently sitting currently at 67c
  • Good rainfall over a large majority of Australian grain growing regions
  • China placing tariffs on Australian barley exports

The question now for many if they are yet to hedge any tonnes of the current crop, “Is it still worth selling wheat at $315mt, feed barley $250/mt and canola $620/mt given the drop of $40-$50/mt respectively from highs”? Some of the factors at play we will discuss below although the current prices do still represent historically very reasonable price levels:

Current growing conditions for the Australian crop:

We now have the potential for the East Coast to produce a better than average crop. There are areas of concern in parts of Northern New South Wales and Queensland that have a favourable forecast for June that could get them back on track. Southern, Western and Central New South Wales appear to be off to a flyer with a better than average start and the crop emerged already being quite advanced. Victoria and South Australia have had a similar good start and after the past week, Western Australia is now looking quite favourable. The Bureau of Meteorology has been unwavering for some time in their forecast for the chance of exceeding median rainfall for the June to August period. The most recent release had the chance at greater than 80%.

Alternative feed barley markets to China:

Given the China decision to introduce a tariff on Australian barley, we look to the alternative feed barley markets and these will be headed by the Saudi market which is approximately 6-8 million tonnes dependant on their own domestic season. The competing origins for feed barley come from Russia/Ukraine/Europe and Argentina. Feed grain demand is also down globally with lower ethanol requirements due to COVID-19 and the corn that was destined for that market is now competing directly with feed barley.

Malt barley demand increases slowly as COVID-19 restrictions ease:

There is no doubt that demand from South East Asian malt customers has been impacted by COVID-19 as bars, hotels and restaurants were all shut down. As expectation is that as these restrictions start to ease, demand from customers that rely on Western Australian malt should being to increase. . The amount of relief from the current limitations is different for each country and thankfully for all of us in Australia, we are better placed than many and the easing may take longer in Asia for this relaxing to occur.