Coarse grains: September quarter 2020

Peter Lock

Corn prices to fall to US$150 per tonne because of record world production
Barley prices to rise to US$200 per tonne because of increased Chinese purchases.

World prices for barley and corn to diverge

Australian barley prices to fall below world price

The Australian feed barley price is expected to fall to $230 ($US165) per tonne, 17% below the world indicator price. The fall in Australian prices below the world price reflects the imposition of prohibitive tariffs on Australian barley exports to China. Improved seasonal conditions across eastern Australia is expected to increase production and reduce domestic demand maintaining lower domestic prices.
Tariffs on Australian barley to China will result in higher prices for exporters which have access to the Chinese market. For example, the French barley price (fob Rouen) is expected to increase by 9% to US$200 per tonne in 2020–21 reflecting increasing demand from China and dry seasonal conditions. In contrast, prices in other markets are expected to fall as Australian barley is diverted.

World corn prices to reach decade lows

The world corn price is expected to fall by 8% to US$150 per tonne in 2020–21, the lowest level since 2006–07. The fall is a result of near record global planting and expectations of record average yields. Compounding the impact of record production on prices is the mixed outlook for demand as a result of the ongoing COVID-19 pandemic.

World coarse grain supply and world prices, 2006–07 to 2020–21f
World Corn production is expected to reach a record high of around 1.2 billion tonnes in 2020–21.

World barley production is expected to remain stable at around 150 million tonnes. 

The world indicator price for barley is expected to increase in 2020–21 but remain below US$200 per tonne. 

The world indicator price for corn is expected to reach the lowest level since 2006–07, reaching US$150 per tonne.
fABARES  forecast.
Sources: ABARES; IGC; USDA

Global production to reach record highs

World production of coarse grains is expected to reach record levels in 2020–21, of almost 1.5 billion tonnes. World corn production is forecast to reach 1.2 billion tonnes, an increase of 6.5% year-on-year. Corn production is expected to reach record highs in the United States and Brazil. Near record production is also expected in China, supported by favourable seasonal conditions.

World barley production is expected to remain stable despite dry seasonal conditions in France, Germany and the Black Sea region. A decrease in European and Black Sea barley production is expected to be offset by an increase in Canadian and Australian production.

Global demand remains uncertain

The global demand outlook for coarse grains remains uncertain because of the ongoing COVID-19 response.

Industrial and food use of coarse grains is expected to decline in 2019–20 as a result of COVID-19 control measures. The use of corn for bioethanol in the United States declined by 8% year-on-year (June 2019 to May 2020) in response to COVID-19 disruptions to travel. The use of coarse grains as food is also expected to have declined over the same period, because of ongoing disruptions to the food service industry.

Use of coarse grains as animal feed is expected to increase despite the ongoing impact of COVID-19. A backlog of US slaughter cattle and poor rangeland condition are expected to support an increase in animals on feed. The ongoing recovery from African swine fever in China is also expected to support the use of grains (principally corn) and oilseeds for animal feed.

A recovery in economic activity as COVID-19 is controlled, is expected to result in a return to trend growth in consumption of coarse grains for industrial, food and feed use in the second half of 2020–21. However, future COVID-19 outbreaks remain a significant downside risk; affecting industrial and food use in particular.

Australian production to rise and demand to fall

Australian barley production is expected to be 25% above the 10-year average to 2018–19 and the highest since 2016–17. Favourable seasonal conditions across major growing regions, particularly in New South Wales, and a favourable Bureau of Meteorology spring outlook (issued 3 September 2020) is expected to result in a national barley harvest of 11 million tonnes, 25% above 2019–20 production. If conditions are significantly wetter than average this may delay the harvest and downgrade crop quality in some regions.

Grain sorghum production is expected to rebound by 480% to 1.7 million tonnes in 2020–21 after record low production in 2019–20. Planted area is likely to increase significantly because of expected favourable seasonal conditions in northern New South Wales and southern Queensland, and fallowing after late season Queensland summer crops in 2019–20. However, the significant winter crop area in northern New South Wales, is expected to constrain available area. An early onset of the northern monsoon and a likely spring La Niña are expected to result in above average yields.

Domestic demand for barley and grain sorghum as animal feed is expected to fall in 2020–21 as a result of favourable seasonal conditions and an early monsoon increasing pasture growth across most grazing regions.

Significant coarse grain surplus for export

A combination of increasing domestic production and decreasing domestic demand are expected to result in a significant surplus of grain around Australia available for export. Australian barley has been effectively priced out of the Chinese domestic market, but new opportunities are expected to open in other markets. Saudi Arabia and the Middle East have historically been an important market for Australian barley. Japan, Thailand and other Asian markets also have the potential to increase purchases of Australian barley.

Australian grain stocks to recover

Australian grain stocks are expected to rebuild as a result of a significant increase in domestic production and lower domestic demand. Grain sorghum stocks are expected to recover from a record low. Barley stocks are also expected to recover to more than 2 million tonnes after the 2020–21 harvest. Stocks of barley and grain sorghum are expected to remain tight until the commencement of the next harvest.

Australian barley production, stocks and prices, 2016–17 to 2020–21f
Australian production of barley is expected to reach the highest level since 2016–17. 

Australian barley stocks are expected to increase strongly in 2020–21.

In 2020–21 domestic prices of barley are expected to fall.
f ABARES forecast. s estimate.
Sources: ABARES; ABS, Jumbuk Ag

Opportunities and challenges

Restrictions on movement of labour

Restrictions on state border crossings are not expected to adversely affect grain harvesting. Agricultural activities have been declared an essential activity, and movement of agricultural workers is likely to be facilitated by state and territory governments. On 24 August, the Queensland government granted border exemptions for agricultural workers from New South Wales. Further exemptions for movement of agricultural workers between other states appears likely.

Alternative markets for Australian grains

In response to Chinese tariffs imposed on Australian barley in May 2020, exports of barley to China effectively ceased. However, overall exports of barley remained stable, as a result of an increase in exports to Japan, Qatar and Thailand. As Chinese purchases of barley from other sources increase, Australia can seek to fill shortfalls arising from a diversion of barley to China. For example, a diversion of Black Sea exports from Saudi Arabia towards China is likely to create opportunities for Australian exporters. Opportunities may also arise in markets that export processed products to China – a third party may import Australian barley and export manufactured malt to China.

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Last reviewed: 14 September 2020
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