In the November WASDE, the USDA lowered Australian barley production to 7.4 MMT. This is still 500,000 MT higher than the current estimate from ABARES. While total production and 2018/19 ending stocks were raised slightly, my eyes are on the Land Down Undaa, and yours should be too.
COFCO, the major Chinese food player, says that Australian barley owns about two-thirds of the Chinese market, accounting for about 4 MMT of China’s 6.5 MMT of total imports. However, these numbers are based on average Australian barley production of nearly 9 MMT. Considering this year’s barley harvest in the Land Down Undaa will be 2 – 2.5 MMT below this, can they export the same amount to China? Likely not!
Currently, the USDA is forecasting Australian total barley exports at 5.7 MMT, but ABARES thinks it’ll be closer to 5 MMT. This is, in part, due to the fact that Western Australian barley buyers/exporters are making more money shipping it over to the eastern side of the country, where barley prices are at record levels, instead of to China and other southeast Asian markets.
So who can fill the Chinese demand that’s going to basically impossible for Australian barley to meet, especially that of malt barley? We know that Canada is the ideal contender, but we’re also cognizant of Black Sea countries being able to provide more feed to China.
Through Week 15 of the 2018/19 crop year (ending November 11), Canadian barley exports are sitting at a total of 528,700 MT, up 11.4% year-over-year. This is a strong contrast to the past few weeks where exports have been tracking behind last year’s pace. Specifically, for Week 15 Canadian barley exports totalled 62,100 MT.
For the full crop year, Agriculture Canada maintained its stance that that we’ll see 2.4 MMT of barley exports out of the Great White North. That being said, Agriculture Canada did drop its price expectation slightly as a reflection of higher global barley supply. However, everything else on AgCanada’s barley balance sheet remained the same, including 1 MMT of ending stocks.
This is based on feed use also climbing 3% year-over-year to a little more than 5.8 MMT. Based on FarmLead Marketplace trading activity though, we know that there is a lot more American corn and Canadian feed-quality cereals that are making their way into Canadian feed rations. On a weekly basis on FarmLead, feed wheat and American corn are consistently being substituted for feed barley for those who are trying to ask to high of a price.
I’m a bit doubtful of this high of barley feed use for the total 2018/19 crop year, but we can take solace in the fact that a strong export campaign should keep prices fairly profitable on both the feed and malt barley side of things. This should also push ending stocks below 1 MMT but intuitively, this likely means we’re going to see more barley planted in the spring of 2019 as positive returns are pursued by all of Western Canada.