China snapping up barley exports

Bulk barley exports are more than double last year’s pace de-spite a smaller overall crop.

Canadian exporters shipped out 542,000 tonnes of the crop through Week 15 of the 2017-18 crop year, compared to 240,000 tonnes the same time last year.

That is a 126 percent increase despite a drop in total supply of the crop to 9.53 million tonnes from 10.29 million tonnes last year.

Neil Townsend, senior market analyst with FarmLink Marketing Solutions, said farmers can thank China for the brisk export pace.

“One of the concerns probably in China is the smaller crop out of Australia,” he said.

The Australian Bureau of Agricultural and Resource Economics and Sciences is forecasting eight million tonnes of Australian barley production, a 40 percent drop from last year’s record crop.

The Australians have stolen market share from Canada in China by selling what they call fair average quality (FAQ) barley that is not quite malting quality but much better than feed.

It has been a big hit with maltsters in southern China, who are not as discerning as some other maltsters around the world.

“That has really disrupted the market over the last say eight or nine years in barley exporting to China,” said Townsend.

Canadian growers harvested a top-notch crop this year, and the country has plenty of barley that fits into the FAQ category, he said. that’s what is being shipped to China, he added.

Townsend estimates Canada will export one million tonnes of barley to China in 2017-18. He figures half of that has already been shipped.

“That’s quite a dramatic im-provement over what we’ve done in the last three or four years but not unprecedented,” he said.

If exports stay at the same pace for the rest of the campaign, it would result in a 1.9 million tonne shipping program, but that doesn’t include the barley-equivalent of malt exports, said Bruce Burnett, director of markets and weather with Glacier FarmMedia.

In 2016-17, those malt exports amounted to the equivalent of another 845,388 tonnes of barley shipped overseas.

Assuming similar numbers for this year, that would be a total export program of 2.75 million tonnes.

Agriculture Canada is forecasting 2.25 million tonnes of exports. Burnett said it is unlikely barley exports will maintain the torrid early-season pace because Australia is now entering the market, so the Agriculture Canada number might be close.

“It is setting up for a fairly tight barley S&D coming into next year,” he said.

That could help boost prices toward the tail end of the year, but feed prices are going to be kept in check by the plethora of U.S. corn on the market, said Burnett.

That is a concern shared by Errol Anderson, analyst for ProMarket Wire.

He believes 500,000 to one million tonnes of corn will come into southern Alberta from Manitoba and the United States this year.

Growers in Alberta who are holding out for malt will also be hitting the feed market with rejected malt barley in the new year.

That will likely keep a lid on feed barley prices unless it is a bitterly cold winter and cattle need to eat more than usual.

“If we get a rough winter, barley prices could go up, but if it stays benign, we’re not going nowhere,” said Anderson.

China has been busy importing feed barley in addition to malt-type product.

China imported seven million tonnes of barley between January and September, up 80 percent from the same time a year ago.

One possible explanation for the huge increase is that China is in the midst of a trade war with the U.S. over distillers dried grain with solubles (DDGS).

China has imposed anti-dumping and countervailing duties on U.S. DDGS in addition to ending an exemption on value added tax.

Those measures have hindered U.S. DDGS exports to China. Exports have plunged to 739,212 tonnes in 2016-17 from five or six million tonnes annually a few years ago. However, China recently reversed its stance on the VAT, announcing it was going to allow U.S. DDGS to enter the country without having to pay the 11 percent tax.

Tom Sleight, president of the U.S. Grains Council, applauded the policy shift in a recent news re-lease.

“This change will immediately improve the competitiveness of U.S. DDGS in what was once our top market, which is a very positive thing,” he said.

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