China's latest tiff with Australia has resulted in duties of 80.5% applied to Australian barley imports as of May 19, which will result in a sudden end to this flow, where more than 50% of China's barley imports are sourced.
In April, the USDA's Grain and Feed Annual for China estimated China's barley consumption at 7.4 million metric tons for 2019-20, falling to 6.8 mmt in 2020-21 due to the availability of other grains. Roughly 50% of this volume is for feed use. Imports are forecast at 6.5 mmt in 2019-20, while forecast to fall by 500,000 mt in 2020-21, with China the No. 1 importer of barley in the world.
There is a great deal of speculation as to how China will replace this lost volume, although there will be competition. Agriculture and Agri-Food Canada reports that world barley production and supply in 2019-20 climbed to its highest levels seen in the past two decades, including an increase experienced across most major exporters. Reuters reports that China's imports will shift to France, Canada, Argentina and smaller European exporters in order to replace Australia's imports. While not a major barley exporter, the U.S. Grains Council quickly pointed out on Twitter that China has granted approval for the import of U.S. barley, as reported in a May 14 press release, and said to be "a market development achievement years in the making finally accomplished with the boost of the U.S.-China Phase-1 deal signed in January."
Despite this potential opportunity facing Canada's exporters, AAFC reduced its forecast for 2019-20 exports by 200,000 metric tons this month to 2.8 mmt, down from 3.068 mmt shipped in 2018-19. Exports for the 2020-21 crop year are forecasts to recover modestly to 2.875 mmt. AAFC commentary points to exports of barley to China dropping by 8% year-over-year in the August through March period, the largest Canadian export market. World trade in barley is expected to fall in the 2020-21 crop year due to the availability of corn, while Canada's share is expected to increase modestly.
Prior to the release of this report, there may have been a case for higher 2019-20 exports, rather than lower. Here is a look at the data.
One week does not make a trend, but week 41 (week ending May 17) exports of Canadian barley was reported by the CGC at 139,500 mt, the second-highest weekly shipments seen this crop year, more than four times the previous four-week average and the highest weekly volume seen since 177,600 mt was shipped in week 19, as seen on the attached chart. Cumulative exports are reported at 1.754 mmt as of week 41, down 238,800 mt or 12% below the year-ago volume.
Despite the larger volume shipped this week, commercial stocks remain high at 444,400 mt. This volume is 73% higher than the same week in 2018-19 and 54% higher than the three-year average. When stocks in terminal position are considered, this volume is reported at 119,100 mt, up 405% from the same week in 2018-19 and 129.5% higher than the previous three-year average.
When the seasonality of barley exports is considered, over the past five years, an average of 51.5% of total crop year exports (barley exports plus malt exports) were realized as of week 41 cumulative volumes moved through licensed facilities as reported by the CGC. Given this historic pace, the current export volume of 1.754 mmt projects forward to total crop year exports of 3.4 mmt total, well above the current 2.8 mmt forecast.
A further look would indicate that over the past two crop years, an average of 62.6% of crop year exports were realized as of week 41, a pace that projects forward to 2.8 mmt, equal to the revised forecast.
This bears watching.
Cliff Jamieson can be reached at firstname.lastname@example.org
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