Barley tariffs in Chinas sights as tensions mount

By Angus Groves

The big news this week is the increasing tensions between Australia and China over the alleged anti-dumping investigation of Australian barley, which looks set to come to a head after 18 months of uncertainty. 

Although these tariffs are yet to be finalised, over the weekend China has outlined a plan to apply a dumping margin of up to 73.6 per cent and a subsidy margin of up to 6.9 per cent on all barley imported from Australia. The total tariff could be as high as 80.5 per cent on Australian barley on, or before May 19th. This move that, if imposed, would effectively end the barley trade Australia has with China. 

As a general average, Australia has exported roughly 3-4Mmt of barley to China over the last 5 years, with the largest export year in 2017 when exports topped 6.4Mmt. Admittedly, the last few years have been lower due to the severe drought plaguing the East Coast. 

Regardless, to lose our largest export customer in China, it would leave Australian barley growers reeling. All this, at a time when farmers have either; already planted a large portion of their barley or are just about to plant their barley crop entirely. 

The question now is, will you continue planting this crop as you had originally planned or switch some of your barley hectares to another commodity? Perhaps a shorter season wheat variety, or later sown chickpeas. 

The other thing to consider with this move by China is the consequences it will have on Australian wheat prices. At the moment it looks as though China are treating Australian barley and wheat completely separately, meaning there aren’t any direct tariffs forecast for wheat. However, if the tariffs go ahead on barley, this will undoubtedly have an effect on wheat values given they are inextricably linked by virtue of feed demand. It’s likely that barley will garner a lot of interest from feedlots around the country given reductions in price are a likely result of the China decision. 

So, with wheat area likely increased at the expense of barley, and less demand from feedlots given prices are likely to be higher than barley, it can be expected that wheat will suffer from some price weakness in the short-to-medium term if the barley tariffs go ahead. 

The other major factor to consider over the next few months is the reductions in demand globally due to COVID-19. One of those that relates to the Australian farmer is malt barley demand, or lack thereof. 

Given pubs/clubs are shut across the globe, we have seen beer demand come under pressure in recent months. This has translated into a sizeable slowdown in malt sales, particularly across parts of Asia which is a major destination for Australian malt barley. 

It’s likely that sales of both feed, and malt barley will suffer terribly into China this marketing year if the tariffs are eventually put into place.