Menu
Horticulture

Where to for barley?

HIGH DEMAND: Our barley is in demand in China because of has inflated values and gross margins.
HIGH DEMAND: Our barley is in demand in China because of has inflated values and gross margins. Contributed

WE ARE heading into another season of winter crop planting so it's a good time to start thinking about where prices may be in ten to twelve months. Are you making planting decisions based on a forward prediction of commodity prices, or making decisions based on crop margins from our last crop year?

There is no doubt that sustained demand for feed barley out of China has inflated values and gross margins, therefore, are well above other commodities such as pulses and canola. There are agronomic reasons to consider, however, in anyone's mind barley acres will increase at the likely expense of pulses and canola.

Based on this, traders around the world are all asking the same question, how much will global barley acres increase this year? Just as farmers have started looking for a view to forward commodity pricing, traders are looking for a forward view on acres and production to form a view on pricing.

Something well publicised in the past is China's sustained demand for feed barley and its tightening on available supplies in Australia. The reality is though, it appears that China's demand for feed barley is not diminishing. Although less barley may be imported by China this year from all origins, it is due to a lack of supply rather than lack of demand. Accordingly, if we increase planted acres globally there is still the demand to be able to buy the extra tonnes produced. Again, the question is, at what price?

Global barley production estimates for 2017/18 are near 145mmt. ABARES have suggested the increase in area globally could be around three per cent, which means the increase in production is only 4-5mmt. Given global demand this year, an increase like this could be absorbed into the balance sheet quite easily. In Australia, an increase of three per cent on this year's crop is not so big. If favourable conditions prevail, however, as was the case in 16/17, then an increase of three per cent becomes a substantial increase.

For Australian grain growers, there is still a lot of market activity to take place between planting and harvest. Forward selling for next year, weather factors, northern hemisphere harvest, and marketing decisions will cause numerous ups and downs before next year's crop is even in the bin. The good news is that this will present opportunities for everyone.

In closing, it is normal at this time of year for there to be more questions than answers when talking about next seasons barley crop. In simple terms, there will be plenty of time to think about what to plant and when to market...

Topics:  agricultural exports barley crop china demand