Barley sales up as China diversifies

"I understand there has been substantial new crop feed barley sales into China already," said Peter Watts, managing director of the Canadian Malting Barley Technical Centre. "That's unusual. We typically wouldn't have sold substantial quantities at this time of year." | File photo

Canada appears to already be benefiting from a new policy in China aimed at diversifying its feed ingredients, says an industry executive and an analyst.

“I understand there has been substantial new crop feed barley sales into China already,” said Peter Watts, managing director of the Canadian Malting Barley Technical Centre.

“That’s unusual. We typically wouldn’t have sold substantial quantities at this time of year.”

Bloomberg is reporting that the world’s biggest importer of corn and soybeans is attempting to reduce its reliance on those two crops in hog rations.

“The agriculture ministry has drafted a plan to partly replace usage of corn and soybean meal with alternatives such as rice, wheat, potatoes and other oilseed meals,” stated the Bloomberg story.

That information was contained in an official Chinese agriculture ministry document published in the China Swine Industry Journal.

The journal is forecasting that China’s corn consumption could exceed 300 million tonnes by 2030, while its soybean demand could reach 120 million tonnes.

That is causing food security concerns in the country, according to the Bloomberg report.

MarketsFarm analyst Bruce Burnett agrees with Watts that China appears to have already embarked on that diversification strategy.

The country purchased large volumes of wheat, barley, peas, sorghum and other crops in 2020.

“They’re trying to lessen their dependence on the U.S. corn crop,” he said.

Exporters of Canadian feed barley and feed peas are two of the big beneficiaries of China’s new strategy.

“If you think about the impact in Canada that it had on our markets for those two commodities and just transfer that around the globe you can sort of see what happens,” said Burnett.

Watts said Canada is well-positioned to benefit from China’s diversification plans because of the types of crops grown in

Western Canada and the ocean freight rate advantage compared to other exporters.

“It would be very positive for Canada and for the agriculture sector to see that kind of demand,” he said.

Burnett has his doubts that China will be able to reduce its heavy reliance on imported corn and soybean meal.

There is a reason they are the top two ingredients in China’s hog rations. They are economical and deliver the required nutrients.

He wonders what will be accomplished by replacing its reliance on corn and soybean imports with foreign wheat, barley and other crops.

Watts thinks it could be part of a risk-management strategy by China. Corn and soybeans are primarily sourced from the U.S. and South America. If one of those regions has a bad crop, China is forced to rely on only one seller.

That is not the case for a crop like wheat, which is grown and sold all over the world.

“That wouldn’t surprise me at all that that would be part of the push here,” said Watts.

The Chinese agriculture ministry policy document did not state what amount of corn and soybeans the government is trying to displace in hog rations with other ingredients.

Burnett said replacing 25 to 30 million tonnes of annual corn and soybean imports with wheat would “make things pretty interesting” on the global wheat balance sheet.

The United States Department of Agriculture projects world wheat ending stocks of 304 million tonnes for 2020-21.

Neil Blue, provincial crops market analyst with Alberta Agriculture, said another reason for the surge in all types of grain imports is the shift from backyard hog operations to commercial operations in China in attempt to rid the country of African swine fever.

That shift has resulted in improved diets as the country weans itself off of the bad habit of feeding table scraps to its hogs.

“That’s increasing the demand for conventional grains,” said Blue.

Contact sean.pratt@producer.com

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