China Weighs Many Barley Options, Then Chooses the Highest CFR Price of Argentina
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Although China has a great demand in the brewing and feed industries, under the background of low overall economic benefits, Chinese Barley production has declined since 2005 to 956,500 tons in 2018 and rebounded in 2019-2020. In the context of low production, domestic Barley imports are highly dependent. Domestic Barley demand is reflected in the industrial brewing and feed industry. The area used as feed for animal husbandry, etc., resulted in farmers’ low enthusiasm for Barley planting. China’s Barley production in 2022/2023 will be 2,000 thousand tons.
The economic benefits are far inferior to other crops, such as wheat, leading to a vicious circle. The domestic Barley planting area and production continue to decline. Moreover, under the background of fewer relevant national promotion policies as a whole, industrial development is relatively slow. Since 2020, with the impact of the global epidemic and disasters, the international Barley supply has been blocked, leading to a further increase in Barley imports and, at the same time, exerting more significant pressure on downstream beer companies.
The most direct reason for China’s high degree of dependence on Barley imports is that the price of domestic Barley is higher than that of imports. The main reason is that France and other developed European countries have a high demand for Barley and large-scale planting, and the early development of the industry has led to planting techniques and varieties. The level is high, and the cost and price are low. Affected by this, the scale of domestic Barley planting continues to decline, which further increases the cost of Barley planting.
More Imports, Less Exports
In 2022, China’s Barley imports hit 5.759 million tons. The export quantity was 0.0017 million tons. Regarding monetary value, China’s Barley imports were 2,052.33 million U.S. dollars; Barley exports were 29,400 U.S. dollars. In April 2023, China exported 15,000 tons of Barley to Mexico, according to AgFlow data. In the same month, China’s Barley import volume was 1 million tons; the import value was 373.3 million U.S. dollars.
Total imports hit 3.7 million tons in the first half of 2023. According to AgFlow data, China imported 1.2 million tons of Barley from Argentina in the first half of 2023. The following suppliers are France (0.9 million tons), Canada (0.8 million tons), Australia (0.5 million tons), and Ukraine (0.2 million tons). So, there is stiff competition among Australia, Canada, and France. China was purchasing large amounts of Barley from Argentina and Canada, such as 67,000 tons and 61,000 tons. Australia, France, and Ukraine ship 60,000 tons at the largest each.
February shipments were the largest in the first half of 2023, with 0.9 million tons. The following months were May (0.64 million tons), Jan (0.6 million tons), June (0.6 million tons), and March (0.57 million tons).
Before China imposed tariffs on Australian Barley in 2020, 70% of Australian Barley exports were sold to China, with an annual market value of about 1 billion Australian dollars. Over the past three years, China has turned to buying more Barley from France, Canada, and Argentina, while Australia is also looking to alternative markets such as Saudi Arabia.
According to data from the US Department of Agriculture, China, and Saudi Arabia are the world’s largest and second-largest wheat importers, respectively, and the two countries together account for 45% of the international Barley trade. Saudi Arabia has traditionally bought Barley from Russia, but Australia has been fighting for a share of the Saudi Barley market after being shut out by China. With China rolling back the measures, Australia may no longer have to compete with Russia in the Saudi market.
Previous restrictions in China had led many Australian farmers to replace Barley by planting more wheat, but farmers may adjust as the Chinese market reopens to Australia. Its production is planned to meet potential demand growth. Australian Barley for beer is one of the local farmers’ most profitable crops per acreage.
Moreover, Australian exporters claim that compared with exporting to China, the profits of selling to the Middle East are less, so they are still more willing to sell to China. It is unrealistic to return to the import ratio three years ago, and Australia has also shifted its export market to the Middle East market. It is reported that Barley buyers in China are expected to buy Australian Barley harvested in October, and it will arrive before the end of the year at the earliest.
Barley Price Competition
Argentina’s Wheat CFR price has been falling each month in the first half of 2023, from USD 394 in January to USD 293 in July. Bulgaria also did the same, from USD 324 in January to USD 243 in July. Australia played differently, offering USD 266 in January, then it increased to USD 309 in April and dropped to USD 268 in July.
Argentina offered the highest CFR price, USD 343.8 on average, followed by France (USD 322.8), Germany (USD 312.0), Canada (USD 308.4), Bulgaria (USD 290.8), Romania (USD 284.4), Australia (USD 275.1), Russia (USD 270.3), and Ukraine (255.5).
Despite Argentina’s CFR prices being higher than others, the country has become the leading exporter to China. Although Ukraine offered the lowest CFR prices, their shipments amounted to only 0.24 million tons.
In A Nutshell
China has plenty of Barley suppliers. Currently, Barley prices in China are affected by French Barley costs and freight costs. Because Australia is closer to China, this has the potential to reshape market dynamics. Their key geopolitical ally Russia offers the lower Barley CFR Price, but their volume remains minimal. Why China turns to distance suppliers such as Argentina and France, despite their higher CFR prices? In 2022, Argentina exported 2.5 million tons of feed Barley, mostly fair average quality (FAQ), with China accounting for almost 90 percent of the total. These exports were done with a premium of $10-15 per ton compared to feed Barley exported to other markets. So, the answer is China’s preference for quality and sales premium.
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