Barley producers shrug off Saudi import ban

Country still isn’t buying agricultural commodities from Canada due to a diplomatic spat, but barley sector has moved on

Saudi Arabia imports about six to seven million tonnes of barley every year. That makes it the world’s number one importer or number two importer of barley behind China, depending on the year.

In the summer of 2018, Canadian sales of barley, wheat, forage and other agricultural commodities to Saudi Arabia came to a crashing halt, following a diplomatic spat between the two nations.

When a country loses access to a massive market, it normally has an impact on prices and export volumes. But Canada’s barley sector has been humming along, despite the Saudis’ decision to halt imports of Canadian ag products.

“You never want to lose access to a big market like that,” said Peter Watts, managing director of the Canadian Malting Barley Technical Centre in Winnipeg. “(But) we’ve had record exports the last couple of years…. We’re going to have another record this year.”

Canada exported 2.19 million tonnes of barley in the 2019-20 crop year, with nearly all of it going to China and Japan. Canada did sell barley to Saudi Arabia in the recent past, about 130,000 tonnes in 2017, but the Saudis slammed the door on Canadian ag products in August 2018.

The Saudi government suspended investment in Canada and announced it would no longer buy wheat, barley and other agri-food products from Canada. The action came after Canada’s foreign affairs department and then minister Chrystia Freeland criticized Saudi Arabia on Twitter for jailing women’s rights activists.

More than two years later, the Saudis still aren’t buying wheat, barley, forage and other ag commodities from Canada, but the barley sector has moved on to other opportunities.

“BCC (Barley Council of Canada) has not been actively lobbying on this issue,” said barley council executive director Erin Armstrong. “Our market development activities have been focused elsewhere.”

Saudi Arabia, with a population of 34 million, is the leading importer of feed barley in the world. The Saudi Arabia Grain Organization (SAGO) purchases barley from around the globe and the Saudi government subsidizes the price of imported grains and forage so that its livestock producers and dairy farmers have access to cheap feed.

But Ukraine, Russia and the European Union have a stranglehold on the Saudi market. In the 2018-19 crop year they represented 90 percent of the barley sold into Saudi Arabia, based on United States Department of Agriculture data. It’s hard for Canada to compete, especially with Russia and Ukraine, because those nations have lower shipping costs into the Middle East.

“While we did sell feed barley to Saudi Arabia in the past, it wasn’t really a significant market for us. It’s difficult for Canada to be competitive in the Middle East these days,” Watts said.

“Canada’s freight advantage is really into Asia.”

Canadian barley sales to Japan and China have exploded in the last couple years. Exports to Japan nearly doubled to 605,000 tonnes in 2019-20 from 325,000 tonnes in 2018-19, the Canadian Grain Commission reported.

The stronger exports could be attributed to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership trade deal.

Barley exports to China have also been robust, thanks to a China-Australia dispute related to COVID-19. Several months ago, Australia called for an international inquiry into the origins of COVID-19 and how it spread. China was not pleased and imposed an 80.5 import tariff on Australian barley. Then, in September, China suspended imports of barley from CBH Grain, Australia’s largest exporter of grains, citing pests in shipments of barley.

The Australia-China fracas will redirect global movement of barley because more Australian product may end up in Japan and the Middle East, Watts said.

If the federal government can’t resolve its issues with Saudi Arabia and restore trade in agri-food, Canada’s barley industry can adjust and carry on, Watts said.

“We’ve seen really strong demand for Canadian barley from the global market… in Asia and some degree in Latin America,” he said.

“We will continue to access those Middle Eastern markets (Oman, UAE and Kuwait), when opportunities come up…. There’s enough demand out there for barley but it (political spats) shifts the trade flows for us and our competitors.”

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