China has dropped the 80 percent tariff on Australian barley that has been in place since May 2020.
That will result in stiff competition for Canada in its top export market.
“This is maybe not a bad year for this to happen,” said Peter Watts, managing director of the Canadian Malting Barley Technical Centre.
Canada is poised to harvest a small barley crop due to hot and dry conditions in large portions of Saskatchewan and Alberta.
Many in the trade are forecasting eight to 8.5 million tonnes of production. Watts thinks it will be closer to the lower end of that range.
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It would be a 20 percent drop in production compared to last year, or about two million fewer tonnes of the crop that needs to find a home.
Australia used to be a fierce competitor to Canada in the Chinese market.
In the two years before China’s tariffs, Australia exported 1.58 to 2.51 million tonnes of barley to China, accounting for about 40 percent of the Asian giant’s imports those years.
Australia’s loss was Canada’s gain. Canadian exports to China jumped to 3.26 million tonnes in 2020-21, up from 1.44 million tonnes the previous year.
China has accounted for 91 percent of the 2.9 million tonnes of Canadian barley exported through the first 11 months of the 2022-23 campaign.
But that’s about to change.
“There is no question there’s going to be reduced demand from China for both malting barley and feed barley from Canada,” said Watts.
The timing of the announcement couldn’t be worse for Canadian growers who are preparing to harvest this year’s crop.
Australian barley prices increased, and international prices decreased in the wake of the announcement.
Australian barley had been trading at a discount to world prices because of China’s tariffs. The two prices are becoming more aligned.
Canada will look to ship more malting barley to the United States, although that could prove difficult.
“They’ve got a better crop this year, so that’s maybe going to be a bit of a challenge,” said Watts.
Mexico and Colombia are two other big malting barley markets that will be targeted.
“This is an opportunity for us to look at those other markets and reduce our reliance on China,” he said.
China is the biggest malting barley market in the world, purchasing three to 3.5 million tonnes of the commodity annually.
Canada was able to gain market share in that market when Australia was forced out through attractive bulk freight rates and China’s desire for Canada’s high quality, high enzyme product.
However, that business came with considerable risk as evidenced by the Australian situation and the recently lifted ban on Canadian canola.
Watts said China will continue to be Canada’s top malting barley customer, but some market diversification is probably a good thing.
On the feed barley front, there will be strong domestic demand in Canada because feed supplies are expected to be low, a hangover from the 2021 drought and this year’s disappointing crop.
The U.S. Department of Agriculture reports that 584,000 tonnes of U.S. corn have already been sold to Canada for the 2023-24 crop year as of Aug. 3, an indication of the strong domestic feed demand.
However, Canada will also have feed barley to export, with the U.S. and China being the likely destinations.
Watts doubts Canadian feed barley will make its way to the Middle East this year. There will be too much competition from the Black Sea into that region.
