Coarse grains: September quarter 2021
- Coarse grain prices are forecast to remain high due to strong global demand.
- Australian barley production in 2021–22 expected to be third highest on record.
- Australian barley exports find alternative markets due to import tariffs imposed by China, albeit at a lower price.
Tight coarse grain supplies driving world prices
The world indicator price for barley (fob Rouen, France) is forecast to increase by 6% to US$253 per tonne in 2021–22. World demand for barley is expected to outpace supply, leading to lower stocks and higher prices. High world barley prices are being supported by demand from China. Tariffs on Australian barley exports to China have reduced the pool of barley available to Chinese importers.
The world indicator price for corn is forecast to increase by 11% to US$242 per tonne in 2021–22. World corn production is expected to reach a record high in 2021–22. However, stocks are expected to remain flat because of strong world demand, particularly from China.
Australian barley prices to benefit from high world prices
The Australian feed barley price is forecast to increase by 7% to $249 per tonne in 2021–22, reflecting the forecast increase in world coarse grain prices (see Figure 1). However, Australian barley prices are likely to remain below the world price because Australian producers are unable to access the higher-value Chinese market due to the imposition of anti-dumping and countervailing import tariffs.
World corn production to reach record highs, barley production to fall
World corn production is forecast to reach record levels in 2021–22, increasing by 6% to 1.2 billion tonnes. This is due to record production in Brazil, China and Ukraine, and higher production in Argentina. US corn production is also forecast to increase in 2021–22 despite persistent hot and dry conditions in some key growing regions. Forecast year-on-year increases in production in the world’s major producing countries largely reflect increases in area planted to corn. World corn stocks are expected to stabilise at 285 million tonnes in 2021–22 after decreasing for 4 consecutive years. The world corn stocks-to-use ratio is expected to remain unchanged from 2020–21.
In contrast, world production of barley is forecast to fall, leading to a decline in world barley stocks to historically low levels. World barley production is expected to decrease by 7% to 149 million tonnes in 2021–22. Production in the European Union and the Russian Federation is forecast to fall following reduced plantings. Drought conditions have limited the yield potential of barley in Canada, leading to an 18% fall in production to 8.8 million tonnes. This is despite an estimated 7% increase in area planted. Production in Argentina and Ukraine is expected to increase because of favourable seasonal conditions and increased plantings. The world barley stocks-to-use ratio is expected to fall to 12% in 2021–22, reflecting the forecast fall in production. This is 25% below the 10-year average to 2020–21 and the lowest level since 1983–84.
World demand for coarse grains to remain strong
World corn consumption is forecast to rise by 2% to 1.7 billion tonnes in 2021–22 based on forecast record feed, food and industrial use. World barley consumption is forecast to fall in line with falling production yet remain high compared to previous years.
The Chinese pig industry’s efforts to contain African swine fever and rebuild the pig herd continue to drive growth in world feed demand. Chinese feed demand for corn is forecast to increase in 2021–22 and imports are forecast to remain unchanged from the record 2020–21 import volume of 26 million tonnes. China has become a major export destination for US corn, with US exports reaching more than 20 million tonnes in the 2020–21 US marketing year (September – August). This export volume is 24 times greater than US corn exports to China in the previous marketing year and exceeds the existing tariff rate quota for corn.
Domestic demand for coarse grains in the United States is expected to remain stable in 2021–22, particularly for corn as animal feed and for food and industrial uses. The use of corn for ethanol production in the United States is expected to increase in response to new renewable energy targets and because high crude oil prices are making biofuels more competitive.
Australian barley production forecast to be above average, domestic demand to fall
Another large crop is forecast for 2021–22, with Australian barley production expected to reach 12.5 million tonnes (see Figure 2). This represents a year-on-year fall in production of 5% – reflecting a decrease in area planted to 4.3 million hectares, 5% below the 5-year average to 2020–21. Despite favourable seasonal conditions, higher relative margins for other crops provided an incentive to shift out of barley, in part because of the loss of the Chinese market and its impact on prices. Following an excellent start to the season in New South Wales and Western Australia, above average winter rainfall across major growing regions is expected to boost yield potential. Favourable seasonal conditions and a positive Bureau of Meteorology spring outlook are expected to result in the third-highest national barley harvest on record.
Grain sorghum production is expected to increase by 15% to 1.7 million tonnes in 2021–22, 14% above the 10-year average to 2020–21 of 1.5 million tonnes. A positive outlook for spring rainfall in New South Wales and Queensland is expected to result in an increase in area planted to grain sorghum. However, winter crop plantings and large cotton plantings in northern New South Wales and Queensland are expected to constrain the available area. The negative Indian Ocean Dipole event is expected to result in strong yields.
Domestic feed demand for barley is forecast to fall by 5% to 1.9 million tonnes in 2021–22. Domestic feed demand for grain sorghum is forecast to increase in line with production yet remain 40% below the 10-year average to 2020–21. Favourable seasonal conditions are expected to support pasture growth sufficient for livestock, reducing demand for supplementary animal feed. Australian grain stocks are expected to increase in 2021–22 because of above average production and lower domestic demand. Barley stocks are forecast to reach 4.9 million tonnes after the 2021–22 harvest, well above the 10-year average to 2020–21 of 1.6 million tonnes. Grain sorghum stocks are expected to recover to 248 thousand tonnes in 2021–22 and continue to rebuild from a record low in 2020–21.
Australian barley exports to remain high
Above average barley production and lower domestic demand are expected to result in a significant exportable surplus across Australia. Despite the Chinese tariffs imposed on Australian barley, overall exports of barley are expected to remain strong in line with high production. Australian barley exports are likely to remain competitive in international markets because Australian barley is trading below the world indicator price.
Opportunities and challenges
Negative Indian Ocean Dipole to improve yield prospects but may affect grain quality
The development of a negative Indian Ocean Dipole is expected to result in above average rainfall across eastern Australia. Above average rainfall is likely to support winter crop production, boost the area planted to summer crops and improve summer crop yield prospects. However, conditions that are significantly wetter than average may delay the 2021–22 winter crop harvest and downgrade grain quality in some regions.
Outlook for China corn crop uncertain
Corn production in China is forecast to increase to a record 268 million tonnes in 2021–22. However, uncertainty exists about the effects of recent adverse weather events in China, including flooding, typhoons and drought conditions, on 2021–22 crop production.Such adverse weather events could reduce expected corn production in China and result in even stronger import demand.
Alternative markets for Australian barley
Australian exports to China effectively ceased due to Chinese tariffs imposed on Australian barley in May 2020. Australia has appealed the import tariffs, having initiated a World Trade Organization dispute complaint against anti-dumping and countervailing duties imposed by China on Australian barley imports. Ongoing trade tensions with China, coupled with high domestic barley production, have led to Australian barley export prices falling below the world barley price. The area planted to barley is estimated to have fallen 5% below the 5-year average, reflecting higher relative margins for other crops partly due to the loss of the Chinese market and its impact on Australian barley export prices. Australian barley exports are competitively priced in world markets, providing an opportunity for Australian exporters to open new markets and increase market share in existing markets. This is reflected by robust demand from the Middle East (particularly Saudi Arabia), Thailand, Japan and Vietnam.
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