It’s been a mixed year for grain production in Australia. The 2018/19 Australian winter crop has come in at a total of 31 million metric tonnes (mmt) according to Glencore Agriculture estimates, well below the 10 year average of 41mmt and the lowest production for the last 10 years. As a comparison, the record winter crop just two years ago in 2016/17 was 58mmt.
Western Australia (WA) experienced slightly below average seasonal rainfall, however, timely October rain saw the state produce close to the largest winter crop ever, estimated to be a total of 18mmt, up 30 per cent on average.
South Australia’s (SA) winter crop was varied across the state with some southern regions producing strong yields, while others produced little or no crop at all. A lack of rain combined with multiple, heavy frosts saw yield potential fall further and production almost reach 5.9mmt, 26 per cent lower than the average of 8mmt.
The eastern states, Queensland (QLD), New South Wales (NSW) and Victoria (VIC), were severely impacted by drought in 2018/19, with most areas receiving less than half their average growing season rainfall. The eastern state’s total winter crop production has come in at approximately 8mmt, 60 per cent less than the 10 year average (19mmt).
WA and SA meeting domestic and international export demand
In a normal year the eastern states would have enough stock to meet domestic demand plus a modest exportable surplus. This year, WA and SA are supplying grain to cover this east coast deficit plus international markets where possible.
Domestically, Glencore Agriculture estimate approximately 3 to 4mmt of grain will be moved to the eastern states from WA and SA in 2018/19.
This is, in contrast, a sharp increase from the previous season when only 1mmt was domestically transferred.
Glencore Agriculture Senior Wheat Trader, Simon Gellert said approximately 18mmt of wheat has been produced in Australia this season.
“We have seen 58 per cent of production come from WA, 18 per cent from SA and 24 per cent produced in the eastern states,” Simon said.
“Usually the eastern seaboard would produce the majority of wheat, however, with two years of dry conditions, their contribution has fallen considerably.”
Australia’s indicative wheat export availability will be around 10mmt after deducting approximately 8mmt for domestic use.
With the domestic market rationing exports via high prices, the volume of wheat exports from Australia to the usual international wheat markets will be well down on average, with this deficit in supply being supplemented by alternate competing origins, said Simon.
“Argentina has enjoyed record wheat production with better than expected quality which has displaced high priced Aussie wheat in those traditional export markets,” Simon said.
“In addition, large export availability from the Black Sea has meant wheat from this region continues to increase market share throughout Asia, the Middle East and Africa which is covering the shortfall.”
Like wheat, Australia’s barley crop is also below average. Glencore Agriculture Barley Trader, Jonathon Evans, estimated the country’s barley crop will total around 8.7mmt.
Australia consumed approximately 4.5mmt of barley domestically which leaves a little more than 4mmt available for export.
“The east coast usually produces a significant amount of Australia’s total barley crop, however, this year they have produced less than 2mmt, a mere 21 per cent of the nation’s total, while WA has had 60 per cent share,” Jonathon said.
“Domestic barley interstate movements will also increase this season.
“It is expected over 1mmt will be sent to the east coast by the end of the 2018/19 season compared to last season’s total of 265,000 tonnes, just a quarter of this year’s total.
“Approximately two thirds of this 1mmt will be destined for QLD and one third to NSW and VIC, with the majority coming via costal shipments from WA, and smaller volumes moving from SA by truck, train and ship.”
For all commodities, international exports will drop about a third year on year. While Australia has lost market share, our international customers still value the quality of grain produced from Australia so demand is expected to rebound when Australia has greater export volumes available.
China investigates imports of Australian barley
In late 2018, China’s Ministry of Commerce (MOFCOM) launched an investigation into imports of Australian barley into China from January 1 2014 to September 30 2018.
MOFCOM has accused Australia’s barley industry of dumping, a practice in which a country sells a product to another country at a cheaper price than what it is selling in its local market. It is alleged that imports from Australia in that time have been injurious to Chinese barley growers.
Glencore Agriculture Senior Commercial Manager, Lyndon Asser said exporters, the Australian Government and grower bodies are working together to address the allegations, lodging answers to MOFCOM questionnaires.
“We are doing as much as possible to defend these claims,” said Lyndon.
“We’re hopeful China will recognise the claims are unsupported, as the Australian trade sell barley at competitive global prices.”
If the Chinese Government find the case to be conclusive, the Australian barley industry could be hit with importing tariffs into China.
“It could have an impact on next year’s barley prices if tariffs are imposed,” Lyndon said.
“This could encourage growers to look at reducing their barley planting area as China is currently the biggest buyer of Australian barley with over 75 per cent of exports going to China in the 2017/18 year.
“Even a small duty imposed could preclude China sales as it would make Australian barley uncompetitive against other origins.
“This not only affects Australian growers but also Chinese brewers and feedlots.”
The investigation will be finalised within 12 months of the initiation.
The next 12 months
As always, Australia is awaiting the crucial seasonal opening in April and May. As growers move through the early part of the year, there is also heightened awareness of the anti-dumping barley situation with China, the resolution of the east coast drought and the US and China trade tensions.
