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Chinese tariff threat opens up barley market

China proposes an 80 percent tariff on Australian barley, which would makes sales into that market easier for Canada

The re-ignition of China’s barley dispute with Australia bodes well for Canadian growers and exporters of the crop, says an industry official.

A number of Australian farm groups are reporting that China has notified Australia that it is proposing to impose tariffs of 80 percent on Australian barley exports following an 18-month anti-dumping investigation.

Australia has been given 10 days to respond. A final determination on the draft decision will be made May 19.

Peter Watts, managing director of the Canadian Malting Barley Technical Centre, said Chinese importers are in the process of booking new crop supplies.

“It’s going to be less risky to buy Canadian barley than it is to buy Australian barley right now,” he said.

China launched an anti-dumping and anti-subsidy investigation into Australian barley exports in late 2018.

Some analysts suggested the investigation was in response to Australia signing security and infrastructure deals to counter China’s influence in the Pacific region.

Australia’s barley exports to China fell to $600 million in 2019, down from $1.7 billion the previous year but a lot of that had to do with severely restricted supplies due to drought.

Watts said China’s investigation appeared to have fizzled out.

“Nobody heard anything for a long time,” he said.

“I had sort of forgotten about it, to be honest.”

And then suddenly last weekend China announced the investigation was complete and it had made a draft decision to implement tariffs against Australian barley.

Watts believes it is no coincidence that China’s announcement follows intense lobbying by Australian Prime Minister Scott Morrison for an international inquiry into the origins and handling of the COVID-19 virus.

“It’s pretty obvious what’s happening,” he said.

Morrison told reporters he does not believe that is the case.

“They certainly haven’t raised it as connected to other issues,” he said.

“I would be extremely disappointed if it was.”

Analysts are expecting a large rebound in Australian barley production, so the threat of a tariff from the country’s biggest customer is a significant blow that has some growers reconsidering seeding plans, according to newspaper reports.

“It’s obviously very worrisome from the Australian barley industry. They’re going to be scrambling,” said Watts.

China is Canada’s top barley customer by a long shot. It imported more than one million tonnes of the crop through the first eight months of the 2019-20 crop year, accounting for 72 percent of total exports.

Watts said new crop sales would likely have been robust regardless of what is happening in Australia, but the threat of tariffs against Australian barley will definitely help Canada’s program.

“It will really crimp Australia’s export trade,” he said.

Watts thinks China will have an exceedingly difficult task convincing the World Trade Organization that Australia was dumping barley, but a WTO case is a time-consuming affair.

In other barley news, the U.S. Grains Council (USGC) recently announced that China has agreed to drop the 25 percent retaliatory tariff on U.S. malt exports.

The USGC said that has resulted in increased sales to China.

Watts said that is not a big competitive threat to Canadian maltsters because China doesn’t import much malt. It prefers to import barley and make its own.

The USGC said the two countries are also working on developing an import protocol for U.S. barley. Currently, U.S. barley is not allowed into the country.

“I’m actually surprised to hear the U.S. didn’t have that in place already, to be honest,” said Watts.

But again, he feels that would not be a major threat to Canada’s barley exports. At one time the U.S. used to export one to two million tonnes of barley annually, but these days it ships out about 100,000 tonnes.

The country uses all the malting quality barley it produces.

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