Barley market ready for roller-coaster ride

It has found itself in many cropping rotations in the previous years due to difficult seasonal conditions.

It has managed to handle most frost and fill heads with reasonable grain quality and size. Barley is also relatively low risk and low cost to produce.

Much of our barley produced is exported, with Australia contributing 30 per cent to 40pc of the world's exported malting barley and 20pc of global feed barley exports in an average year.

More than 60pc of this exported barley has been going to China.

With both African swine fever and the novel coronavirus, the environment for barley being exported into China has changed. So what drivers are on the cards for barley in the year ahead?

Coronavirus is more recent news, but the larger influence on barley pricing and feed grain exports remains ASF.

Removing almost a quarter of the world's pig population has major flow-on consequences.

The demand for feed grains into China will recover slightly, but difficulties in containing ASF, constraints in the rate at which other meat producers can increase their production and coronavirus are slowing down recovery efforts.

If we see a recovery in feed demand, the United States-China trade deal will place us at a disadvantage as China has to preferentially buy US ag commodities.

This includes sorghum and corn, which directly replaces barley in feed rations.

As well as this, at the height of Australian barley exports into China, there was a high supporting corn price for Chinese producers.

This priced corn out of feed mixing rations. Barley was used instead, but the present supporting price is not as high.

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Global production of barley is also expected to increase by 13pc and stocks are tipped to rise by 20pc due to increases in production in the European Union and a return to more average conditions in Australia.

Domestically, many farmers will be looking for resilient crop types, consequently seeing barley work its way into rotations.

The investigation into the countervailing measures and anti-dumping allegations out of China are also still hanging in the air, with decisions postponed from late last year to May and June of this year.

Without the certainty of a decision, there is an added risk to barley purchases out of Australia.

As well as feed barley, China is a big consumer of Australian malt barley. This is because China is the largest producer and consumer of beer in the world.

A short-term impact of the coronavirus will be a slowdown in beer production and consumption, consequently reducing malt barley demand. But, this is likely to be short-term.

Australia is coming from a position of low to no stocks of grain and fodder through many parts of the country and will have to rebuild these stocks in the coming seasons.

This lends a little support to pricing, with some domestic demand still there throughout the coming months before new crop hits markets.

Indian fumigation requirements have also changed. This may see potential increases in malting barley exports.

This is starting from a low base of 11,000 tonnes, so this market is unlikely to replace Chinese demand - but it is another potential market to access and support barley pricing.

An Indonesian trade deal means Australia can export 500,000t of feed grain preferentially ahead of other origins.

This can include barley, feed wheat and sorghum and increases 5pc each year.

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This again does not make too much of a dent in the amount that would traditionally end up in China, and would also take some education in milling as typical feed grains include corn over barley.

The good news is Australia is looking to other markets, but this will take time to develop and foster the relationships to support long-term, sustainable trade.

The outlook for domestic demand longer term is also positive as Australia's population increases and people have the flexibility to increase the amount of protein in their diets.

The goal of any grain marketing strategy is to manage price and production risk.

Knowing what is driving our markets can help to form our thinking and outlook for the year ahead.

With this in mind, it is a good time to be forming our strategy, particularly with an average year potentially ahead.