Saudi barley ban signals loss of high-value market

Of all the countries that import barley, China and Saudi Arabia are usually the top two in the world.

Canada is moving large volumes of barley into China, but the other major market could be closed to Canadian barley for the rest of 2018 and possibly in 2019.

A highly publicized diplomatic battle between Canada and Saudi Arabia has cut many economic ties between the two nations. Saudi Arabia’s leaders are furious at Canada because in early August Global Affairs Canada urged the kingdom to release several female women’s rights activists from jail.

In response, Saudi officials have vowed to pull investments from Canada and stop buying anything from Canada, including feed barley.

Last year Canada shipped around 130,000 tonnes of feed barley to Saudi Arabia.

“It’s only about 1.5 percent of the entire production in Canada,” said Phil de Kemp, executive director of the Barley Council of Canada. “It doesn’t sound like much, but … it’s a high-value market. We’ve had a long-standing trading relationship there.”

Saudi Arabia imports most of its feed barley from the Black Sea region or Australia, so the market isn’t as important as Japan or China for Canada’s barley industry.

Still, being completely shut out of any market is “dis-concerning,” de Kemp said.

The Saudi-Canada diplomatic battle is negative for barley exports, but the positive news is that exports to China are way up.

Canadian Grain Commission data, as of the end of May for the 2017-18 crop year, shows that barley exports were 1.731 million tonnes. That compares to 1.026 million tonnes for the same period a year ago, an increase of almost 70 percent. Most of those gains can be attributed to China, which has been buying malt barley from Canada at a blistering pace.

Looking further ahead, the Comprehensive and Progressive Trans-Pacific Partnership is also positive news for Canada’s barley trade.

Canada’s minister of international trade, Jim Carr, is determined to ratify the CPTPP this fall, which could boost sales of food, feed and malt barley to Japan and Vietnam.

“We do about 60,000 tonnes of food barley, or barley that is used for rice extender (in Japan),” de Kemp said.

Under the existing arrangement with Japan, the tariff rate quota is 25,000 tonnes. Shipments above that level are subject to higher tariffs.

Under CPTPP, the tariff rate quota for Canadian food barley into Japan is 65,000 tonnes.

As well, beer consumption in Vietnam is rising and the country has 92 million people, so it could become a significant market for Canadian malt.

The other CPTPP benefit for barley is domestic demand. The trade deal should help Canada sell more pork and beef to Japan. That, in turn, could increase hog and cattle numbers across Canada, de Kemp said.

“Taking a look (at) projections for increased beef and hog sales, we think there’s an opportunity there for 300,000–400,000 tonnes of additional feed barley that’s fed in Canada.”

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