Shujia (Charlie) Qin
- The second highest value of barley production and third highest value of sorghum production in 2022–23.
- High world coarse grain prices expected to increase further due to tightening world supply.
- Australian production to decrease but remain above long-term average supported by favourable seasonal conditions.
In 2022–23, the gross value of barley production is forecast to decrease 7% from record levels to be $3.9 billion, which is the second highest on record. The value of sorghum production is forecast to decrease 3% to $929 million, which is the third highest on record. The high value of production reflects elevated global grain prices alongside above average production of barley and sorghum in 2022–23 with expectations of a third consecutive year of above average rainfall (see Seasonal conditions). However, the volume of barley produced is expected to fall from the near record level achieved in 2021–22 due to area planted shifting from barley to wheat and canola, incentivised by higher relative wheat and canola prices.
The value of barley exports is forecast to increase 7% to be the highest on record, reaching $3.2 billion in 2022–23. This is due to increased export prices alongside the high volume of barley exported which is forecast to remain steady at 8.1 million tonnes, 36% above the 10-year average to 2021–22. Since China imposed tariffs on Australian barley exports in May 2020, Australia has increased the share of exports directed towards alternative markets such as Saudi Arabia, Japan, United Arab Emirates, Kuwait, Vietnam, and Philippines (Figure 1.1). As part of redirecting its barley exports, Australia has found also found new opportunities in markets it previously had a minimal presence in, including Mexico, Peru, and Canada.
The value of sorghum exports is forecast to be $747 million in 2022–23, which is the second highest on record. The volume of sorghum exported is expected to reach 1.8 million tonnes, 144% above the 10-year average to 2021–22. Sorghum exports over the 2022–23 financial year are supported by remaining exportable supplies of the 2021–22 sorghum crop, which was the second highest on record. The 2022–23 sorghum crop is forecast to be well above average, and exports of this crop are expected to commence in March 2023. China remains the dominant market for Australian sorghum (83% of exports were destined for this market in 2021–22). Favourable prices for Australian sorghum exports reflect strong price prospects in the Chinese market.
The world indicator price for barley (fob Rouen, France) is forecast to increase by 4% to US$346 per tonne in 2022–23. Higher world barley prices are supported by increased tightness of world barley supply and high prices for other grains including corn and wheat. The world barley stocks to use ratio remains at historically low levels. World barley prices are elevated relative to historical levels and are forecast to be 54% above the 10-year average to 2021–22.
In line with global feed grain prices, Australian barley prices are forecast to rise in 2022–23 (Figure 1.2). This reflects Australian barley remaining a viable and competitive feed option relative to other feed grain alternatives. In 2022–23, the Australian feed barley price is forecast to reach $326 per tonne. Australian barley prices have maintained a discount relative to the world barley price following the imposition of Chinese tariffs on Australian barley. This forecast assumes Australian barley will continue to face tariffs in the higher value Chinese market, leading to Australian barley maintaining a discount relative to the world barley price.
Corn drives global feed grain markets and corn has a bearing on the demand and price for barley (and other coarse grains). The world indicator price for corn (fob Gulf, US) is forecast to increase 7% to US$310 per tonne in 2022–23. Decreased global corn production is expected to drive tighter global supply, supporting elevated prices. Higher prices also reflect constrained Ukrainian grain exports. China is typically the primary export market for Ukrainian corn and is expected to draw down domestic corn stocks, softening upward price pressure on world markets.
In 2022–23, Australian barley production is forecast to be 12.3 million tonnes, decreasing 12% relative to production in 2021–22. This forecast is 17% above the 10-year average to 2021–22, due to above average yields supported by favourable seasonal conditions forecast for 2022-23.
The year-on-year fall in production is due to area planted to barley decreasing 5% to 4.2 million hectares. Strong price prospects and the favourable start to the season have incentivised increased wheat and canola area at the expense of barley area. The barley yield is forecast to be above average with crop establishment and development being supported by soil moisture profiles across cropping regions. The outlook for above average rainfall during spring is expected to support crops through critical development stages and contribute to strong forecast yields.
Grain sorghum production is forecast to decrease 4% to 2.6 million tonnes in 2022–23, 68% above the 10-year average to 2021–22. Elevated soil moisture levels and above average rainfall forecast for spring in New South Wales and Queensland are expected to contribute to sorghum area planted which is 42% above the 10-year average to 2021–22 and strong yield prospects.
World corn production is forecast to decrease by 3% in 2022–23 to 1.2 billion tonnes (Figure 1.3). Lower production is driven by reduced global corn area which is forecast to decrease 2% to 204 million hectares. This reflects increased area planted to oilseed crops including soybeans and sunflower due to high prices and their lower fertiliser requirements.
The United States is the largest producer of corn and production in 2022–23 is forecast to decrease 5% to 365 million tonnes driven by a 4% decrease in corn area. Other regions expected to decrease corn area include the European Union, India, and Ukraine. Recent hot and dry conditions in the European Union and United States have also contributed to drought stress for crops, decreasing forecast yields. The continuation of hot and dry conditions may lead to further downgrades to yields. Record production in South American regions including Brazil and Argentina is expected to partially offset decreased production in other areas. However, the prospect of a third consecutive La Niña event poses some uncertainty for South American production at this stage. China is expected to draw down domestic corn stocks due to reduced global exports, offsetting the accumulation of Ukrainian corn stocks.
The world corn stocks-to-use ratio is forecast to be 4% below the 10-year average to 2021–22, reflecting tight global supply. Tight global corn supply is driving tight world supply of feed grains, contributing to higher prices for alternative feed grains including barley.
World barley production is forecast to increase 1% to 146 million tonnes in 2022–23. This reflects generally higher yields which are forecast to offset a 2% decrease in global area. In Russia, generally favourable seasonal conditions are expected to support high yields and production is expected to increase 14% to 20 million tonnes. Canadian barley production is forecast to increase 42% to 10 million tonnes reflecting the recovery from drought conditions.
In the European Union, excessive heat and dry weather has hindered grain fill and lowered barley yields. Despite 3% higher area in the EU, barley production is forecast to decrease 4% to 50 million tonnes. Grain production in Ukraine remains uncertain and subject to the ongoing conflict, and barley production is currently expected to decrease 36% to 6 million tonnes.
World barley stocks are expected to remain at historically low levels in 2022–23, remaining 24% below the 10-year average to 2021–22. Tight global barley supply means that Australian barley will remain in demand.
World corn consumption is constrained by tight global supply, with consumption remaining steady at 1.2 billion tonnes in 2022–23. World barley consumption is forecast to decrease 1% to 146 million tonnes reflecting declining feed use due to low world supply.
China leads global feed demand and growing feed consumption is driven by the recovery of China’s pig sector. China meets growing feed consumption through imports of grains including corn due to insufficient domestic production. Notably, China has historically been a major market for Ukrainian corn (Figure 1.4). Although Ukraine has recently regained access to ports for shipping grain, the prospect of Ukrainian grain exports to markets including China remains highly uncertain. China is expected to draw down domestic corn stocks and may increase imports from alternative suppliers including Brazil (see Opportunities and challenges section) to meet domestic feed demand. Recent drought conditions in China are also expected to stress wheat crops, further contributing to tight supply of grain for feed. Imports of alternative feed grains including barley and sorghum play an important role in easing the tightness of China’s domestic feed grain supply.
In the United States, corn consumption is expected to decrease 2% in 2022–23 due to reduced domestic feed consumption. Decreased feed consumption reflects a forecast reduction in domestic animal numbers. Notably, feed is the highest input cost in livestock and poultry production and elevated prices for feed have impacted producer returns, contributing to higher livestock slaughter and decreased poultry production.
Industrial consumption of coarse grains including corn is expected to remain at stable levels. Although high corn prices have increased input costs for ethanol production, producer margins were assisted by high prices for ethanol and transport fuels (Figure 1.5). US ethanol production is also influenced by the recent finalisation of biofuel blending mandates. These mandates will require the total blending volume in 2021 and 2022 to be higher than the level previously proposed in December 2021, supporting US ethanol production.
Improved Ukrainian exports contribute to easing global prices
Ukraine has historically been a major corn exporter, making up 14% of world corn trade over the 10 years to 2021–22. Increased grain exports would contribute to easing high global prices. Russia's invasion of Ukraine has constrained Ukrainian grain export capacity, reducing availability of world supply. The recent agreement to facilitate grain to be shipped from select Ukrainian ports is intended to increase grain available to world markets. The USDA has revised Ukrainian corn exports in 2022–23 from 3.5 million tonnes to 12.5 million tonnes.
Brazil may become a major source of Chinese corn imports
China leads global corn imports and currently is reviewing trade protocols for Brazilian corn imports. China and Brazil previously signed a protocol of phytosanitary requirements for Brazilian corn imports in 2014, but trade was minimal due to the complex compliance requirements. The successful revision of these protocols may support more substantial volumes of Brazilian corn imports to China, easing tightness of China’s domestic feed supply. Notably, China drives world feed demand and is the primary market for Australian sorghum exports. Increased corn imports from Brazil may reduce demand for other feed grains including sorghum.
Possible third La Niña would further tighten world coarse grain supply
Most international climate models indicate the possible return of La Niña conditions in late spring of 2022. If this were to occur in late 2022, this would be the third consecutive La Niña event. The re-emergence of La Niña increases the risk of repeated dry conditions in regions typically affected by La Niña events. This would potentially reduce crop prospects, including for the forecast record South American corn production, further tightening world supply.