Barley Archives | Grain Brokers Australia

Barley anti-dumping investigation remains a sleeping giant

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The news late last week that the Ministry of Commerce (MOFCOM) of the People’s Republic of China had decided to extend the anti-dumping investigation into Australian barley imports, while disappointing, came as no surprise to most market pundits.

Citing the complexity of the case, MOFCOM announced that the probe would continue for an additional six months and will be completed by May 19, 2020.

The extension comes despite full cooperation by the Australian government, its agencies, industry bodies and exporters with the ministry’s investigation over the last twelve months. By all reports the detailed information sought by Beijing in the course of the investigation has been provided in accordance with their guidelines and timelines.

The ministry launched the probe in November last year, accusing Australia of dumping barley into the Chinese market at prices it considered below fair value.

World Trade Organization (WTO) rules state that anti-dumping probes should be completed within one year, though the investigating country does have the option of an additional six months under special circumstances. It seems that ‘complexity’ qualifies as there appears to have been no attempt by the WTO to intervene.

And our’s is not the only agricultural trade stoush involving China at the moment. Early this year Beijing halted purchases of Canadian canola alleging inspectors found pests in several shipments. This has led to a slump in Canadian canola exports and has left growers battling lower prices and holding silos full of unsold seed.

And the US-China trade war continues. The on-again, off-again negotiations have been excellent fodder for the world press. However, its impact on world trade and the global economy is growing rapidly.

According to the United States negotiators, the two countries held further constructive discussions (whatever that means) over the weekend. Completely different rhetoric is being reported in China, with officials there saying the two sides are not even on the same page. Plenty of work to do, it seems, before a deal is inked.

In recent times, Australia has been China’s largest supplier of barley with the grain going into both the brewing and stockfeed markets. In the 2017/18 marketing year (October 2017 to September 2018) China imported almost 6.5 million metric tonne (MMT) of Australian barley. This was valued at more than AU$2.2 billion and accounted for around 75 per cent of China’s barley imports in that year.

Though still significant, that dropped substantially in the 2018/19 season, to a tad under 2.4MMT. To put that in perspective, Japan, Thailand and Vietnam were the next biggest importers of Australian barley at 653,000, 205,000 and 112,000 metric tonne (MT) respectively.

What does this mean for exports of Australian barley over the 2019/20 marketing year? If past actions are a fair indicator of future intentions, it certainly doesn’t mean that there will be no barley trades to China.

While a significant proportion of last season’s export business to China would have already been on the books when the anti-dumping investigation was announced, there was 730,000mt shipped in the second half of the season. Most of this business was probably concluded after the investigation commenced.

However, any new crop sales are more likely to be malting barley as opposed to feed barley. Feed grain demand is falling as the African Swine Flu epidemic continues to decimate the pig population in China.

On the other hand, Chinese brewers prefer Australian malting barley over French on the basis of quality, and malting barley prices in Canada make that origin uncompetitive at the moment. In fact, market rumours are suggesting that as much as 500,000MT of new crop Australian business may have already been concluded.

The expectation is that barley exports to China will be down again this year. Those exporters that are willing to accept China as a trade counterparty are likely to trickle barley onto the Chinese mainland but will minimise risk by doing so one, or maybe two, cargos at a time.

Outside of China, Saudi Arabia, in particular the port of Dammam in the Arabian Gulf, increases in significance as a destination for Australia’s exportable surplus in the first half of 2020. Australian exporters would certainly be hoping to do more than the one, 66,000MT, cargo shipped to the Gulf state in the 2018/19 season.

The Saudi Arabian Grain Organisation (SAGO) announced a tender late last week for 1.02MMT of animal feed barley for February and March arrival. The results were released on Monday with offers received from Australia, the European Union, the United States, Argentina and the Black Sea region.

In the end, SAGO booked 17 individual consignments of 60,000MT, with 13 (780,000MT) destined for Red Sea ports and 4 (240,000MT) to be delivered to Arabian Gulf ports. The average price of US$216.62 was an increase of US$6.67 (approximately AU$10) on the previous tender for an identical quantity on September 30.

Looking at the breakdown of offers, and the companies involved, it would be safe to assume that a significant portion of the Arabian Gulf business will be executed out of Australian ports and, surprisingly, some of the Red Sea shipments may also be Australian origin. Great news for domestic barley growers in a week when China disappointed.

With Australia’s freight advantage over the Black Sea and Europe, domestic exporters will also be looking to other traditional Asian consumers such as Japan, Thailand and Indonesia to step up to the plate and increase their imports of Australian barley over the next ten months.

Call your local Grain Brokers Australia representative on 1300 946 544 to discuss your grain marketing needs.

Global grain markets looking for direction after benign WASDE report…

Posted by | Grain Brokers Australia News, USDA WASDE Report, Weekly Commentary | No Comments

The United States Department of Agriculture (USDA) released their November World Agricultural Supply and Demand Estimates (WASDE) to the market last Friday (Saturday morning down under) and there was nothing to get the trade, or futures markets, too excited.

Chicago Board of Trade (CBOT) December wheat futures closed the week at 510¼ cents per bushel (c/bu), down 2¼ c/bu on the day and down 5¾ c/bu for the week. Wheat futures have been trending downward since a 3-month high of 532¼ c/bu was set on October 18. That equates to a fall of almost AU$12 over the last three weeks.

The December corn futures contract closed last Friday’s trade at 377¼ c/bu, up 2 c/bu on the day but down 12 c/bu for the week. The soybean contract for November closed at 919½ c/bu, down 5½ c/bu on the day and down 4¾ c/bu for the week. Like wheat, both corn and soybean futures have been trending lower in recent weeks and have lost the equivalent of just under AU$12 and just over AU$11 respectively since the highs of mid-October.

The WASDE wheat production numbers were basically a juggling act, the result being a small global increase of around 0.3 million metric tonne (MMT). Australian production was decreased by 0.8MMT to 17.2MMt, similar to last year’s final number. However, this is still around 1.5MMT above many domestic trade estimates, and a further reduction is expected in the next report, due for release on December 10.

Argentine wheat production was decreased by 0.5MMT to 20MMT. Like Australia, this is around 1.5MMT above the most recent estimates emanating from the South American republic. Last season’s production was 19.5MMT. Reaping has commenced in many parts of the country, and the Buenos Aires Grain Exchange called the wheat harvest 7 per cent done compared to 11 per cent at the same time last year.

The United States (US) was the other major wheat producer which saw production fall compared to last month. The USDA pegged 2019/20 production at 52.3MMT, a decrease of 1.1MMT, but still, 1MMT higher than last season.

Planting of the next US winter wheat crop is well underway with 94 per cent expected to be planted by early this week. This compares to 89 per cent last week, 85 per cent last year and 92 per cent on average. Crop ratings are expected to be unchanged week-on-week at 57 per cent good to excellent, versus 51 per cent last year.

On the positive side of the equation, Ukraine, Russia and the European Union (EU) all saw increases to their final wheat numbers for the 2019/20 season compared to the October report. Ukraine production was increased by 0.3MMT to 29MMT. This represents a significant year-on-year increase of 4MMT, or 16 per cent.

The USDA increased Russian production by 1.5MMT to 74MMT. Here again, the USDA appears to be conservative with their revised estimate as local Russian forecasts are around 1-2MMT higher. That said, it is still around 2.3MMT higher than 2018/19 production.

The most significant increase to global wheat numbers in Friday’s WASDE report came in the EU. Production was posted at 153MMT, an increase of 1MMT compared to October and an increase of 16MMT compared to last season. However, the USDA number is 3MMT lower than the most recent European Commission wheat forecast of 156MMT.

In France, the European Union’s biggest wheat producer, planting of the winter wheat crop is delayed by wet weather. The French state grains board, FranceAgrimer, estimates that 67 per cent of the soft wheat crop has been planted, up 13 per cent on the previous week, but still well behind the long term average of 82 per cent.

With global wheat demand remaining static, the washup of all of the production changes was an increase in world ending stocks to a record 288.3MMT, 142.6MMT (49 per cent) of which is held outside of China.

On the barley front, the WASDE report was slightly bullish. The USDA cut Australian production by 0.2MMT to 8.4MMT. While this may be achievable, it appears to be on the high side based on the hard finish experienced in almost all the major barley production regions of the country.

Elsewhere, Argentine production was decreased by 0.1MMT to 4.7MMT (5.1MMT last year), the EU was raised by 0.2MMT to 61.8MMT (55.9MMT last year), and Ukraine was increased by 0.3MMT to 9.5MMT (7.6MMT last year).

The USDA increased global barley demand by 0.8MMT, predominantly in Russia, Ukraine and EU and world ending stocks were decreased by 0.8MMT, mostly in Russia and Saudi Arabia. Australian barley exports were reduced by 0.2MMT to 4.3MMT, and China’s barley imports were cut by 0.2MMT to 6.3MMt (5.5MMT last year).

There were several decreases to global corn supply, but most had already been factored into trade calculations, hence the subdued futures market reaction. US production was down by 3MMT after the yield forecast was decreased to 167 bushels per acre (10.5 metric tonne per hectare). Mexican, Ukraine and EU production were cut by 2MMT, 0.5MMT and 0.2MMT respectively, and Russian was increased by 0.5MMT.

US corn demand was down by 1.2MMT, but world demand was increased by 0.8MMT compared to the last WASDE report. World ending stocks are forecast to decrease by 6.6MMT, predominantly in Brazil, China, EU and the US.

The soybean numbers were quite benign, with global production down by 2.4MMT, mainly in India and Canada, and global demand down by 2.4MMT, primarily in India, China and the United States.

The grain market needs news, and the WASDE report provided nothing that wasn’t already known and factored into global thinking. From a wheat and barley perspective, 2019/20 production is basically known, even though the USDA numbers still need a little tweaking in several key jurisdictions.

A resolution, or otherwise, to trade disputes involving China is a key driver in the near term. The big one, of course, is the US standoff, with Trump seemingly dousing the most recent positive news with his usual Twitter diplomacy.

Call your local Grain Brokers Australia representative on 1300 946 544 to discuss your grain marketing needs.

Market awaits news from China as the barley harvest swings into gear…

Posted by | Weekly Commentary | No Comments

Farmer selling has picked up over the past week as the 2019 harvest gathers momentum in the southern grain-growing regions of Australia. And the market pressure created by this increase in supply, in conjunction with a rally in the Australian dollar, pushed grain prices lower across the board.

The Central Queensland wheat harvest came in close to industry expectations at around 375,000 metric tonne, and on-farm storages are filled to the brim as growers take advantage of a lack of production in the southern part of the state. This grain will be trickled into the domestic market over the coming months, filling part of the void created by abysmal production in southern Queensland and northern New South Wales.

The southern Queensland harvest has come and almost gone in a very short period of time. There were isolated pockets of harvestable grain that weren’t cut for hay, but on the whole, the ongoing drought has pushed production lower than last year’s dismal total.

The story in northern and central New South Wales is no better. These regions should be a hive of activity with headers rolling and queues at the local silo a feature. Instead, the paddocks are bare, and many silos haven’t even opened due to the record low production. What has been produced will go directly into the domestic market or is being stored on-farm for delivery to local end-users in 2020.

The production outlook in Southern New South Wales, Victoria, South Australia and West Australia is far better, and this is where the supply pressure is being seen as growers look for cash flow by selling off the header. Falling grower bids may well stem the tide of selling, so cash prices become a function of how desperately the trade need to buy. With domestic demand covered, export interest will be the most likely catalyst for an increase in buyer appetite.

Barley has dominated harvest proceedings thus far. Reports from the field suggest that early barley quality, and yields, have been quite variable as the tough finish manifests itself in high screenings and low malting barley selection rates in many districts. That said, it seems that yields, on the whole, are surprising to the upside.

The price of wheat delivered onto the Darling Downs retreated around $5 last week to close at about $410. Western Australia and the Eyre Peninsula are the regions most likely to ship wheat around to Brisbane over the next 12 months, and grower bids at those ports fell by around $7 across the week. Geelong bids fell by the same number.

On the other hand, the price of feed barley delivered Darling Downs region remained steady across the week at around $375. The Geelong and Kwinana feed barley bids fell by $10, and the Port Adelaide and Port Lincoln bids fell by $5 across the week.

Port Lincoln is the cheapest Australian grain at the moment with ASW wheat and feed barley values now down to US$225 Free on Board (FOB) and US$193 FOB respectively. Kwinana port values sit at around a US$8 premium for both grains. Both ports should be competitive into the wheat export pathway at those values, and recent sales of wheat out of Western Australia support that notion.

Barley, however, is a different story. Australia has relied heavily on China in recent years. November 18 is the anniversary of the launch of the anti-dumping probe by the Chinese Ministry of Commerce (MOFCOM). Under the World Trade Organisation (WTO) regulations results of such investigations, or some guidance on potential actions, are expected within 12 months, but a six-month extension can be granted.

The Australian trade will be looking to Beijing to provide such guidance, whether positive or negative, in the next few weeks so that the market has some direction and certainty through harvest and into the New Year. There are rumours of small volumes being traded, but most exporters are not willing to entertain Chinese enquiries due to the execution risk any sales would present under the current circumstances.

So, where does the Australian barley exporter look in the absence of Chinese demand? Saudi Arabia is the logical answer. Black Sea values were sitting at around US$190 FOB last week. Add freight of US$25 makes it US$215 Cost & Freight (C&F) into the Red Sea port of Jeddah. That compares US$226 C&F ex WA using US$200 FOB Kwinana and freight of US$26. Out of Port Lincoln, it works out at US$223 C&F using freight of US$30. So no joy into Jeddah at current values!

How about the Persian Gulf port of Dammam? Freight from the Black Sea into Dammam is around US$11 over Jeddah. Freight out of Australian ports would be the same as Jeddah. Suddenly, at last week’s prices, Australia is competitive against Black Sea origin for the next Saudi tender.

However, Argentina could well rain on our parade. Export barley values out of the deep-sea port of Bahia Blanca were quoted at US$170 last week. Add freight of around US$42, and Argentina trumps both the Black Sea and Australia at the next tender. Argentina likes to get the business on early, so are also likely to be the weakest seller. This is especially the case at the moment as the new Peronist government is threatening to increase export taxes.

The only other obvious export options at the moment are Thailand and Indonesia. The later is expected to be looking to Australian supply once the free trade agreement has been ratified. It has been tabled in the Indonesian parliament and will be debated in the Australian Senate this month. Endorsement by both parties is expected by year’s end.

Domestically, the Queensland stockfeed market will continue to require feed barley from Victoria, South Australia and Western Australia for the next 12 months. At the current delivered Darling Downs spread of $35, feed barley is buying demand away from wheat, and the consumer has been taking advantage of the relative value in recent weeks.

Call your local Grain Brokers Australia representative on 1300 946 544 to discuss your grain marketing needs.

Weekly Report 5/2/16

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CORN/BARLEY

March 16 CBOT corn futures closed higher at US$3.68 per bushel up 3.0 Usc/bu for the week.

Chart 160205 WR

Brazil’s corn forecast was increased by 1Mt to 83.3Mt in January by CONAB. Exports of corn were also revised up and are expected to reach 29Mt, with high demand due to weak local currency. The lower Brazilian Real supporting local farmers to sell to the export market not the domestic end users.

Informa has raised the Argentine corn crop forecast to 26 million tonnes up 4 million tonnes from their previous estimate of 22 million tonnes.

South African grain association – Grain SA has lowered their initial estimate of corn imports from 5 million tonnes to 3.8 million tonnes.

Barley prices are also lower over the week against reflecting a lack of demand and the firmer AUD.

Chart 160205 WR1

AUSTRALIAN DOLLAR

The Aussie traded at the 72¢ this week for the first time since early January.

The Reserve Bank has left interest rates unchanged at their February 2016 meeting.

Chart 160205 WR2

WEATHER

BOM forecasts rainfall is more likely to be above average across much of the southern half of Australia with the strongest probabilities in the southeast over the next 3 months.

Chart WR 1601293

To read the full report click the below link.

Weekly Report 16_02_05

Weekly Report 2/1/16

Posted by | Grain Brokers Australia News, Misc | No Comments

CORN/BARLEY

In a subdued finish to 2015 corn hit new contract lows of US$3.57 during the week.

March 16 CBOT corn futures closed lower at US$3.58 per bushel down 6.8 Usc/bu for the week.

To avoid national shortages and to slow down rising prices, India will import 0.5Mt of duty free corn, the country’s first overseas imports in 16 years. For the second year in a row, severe drought in India has hindered domestic output. India traditionally is a major exporter of corn to Southeast Asia. The switch in the country’s position could give more trade to other large corn exporters such as US, Brazil and Argentina.

Severe drought conditions currently persist in South Africa is raising concerns, they may have to import corn as early as May if conditions do not improve.

BEANS/CANOLA

Chicago May-16 soybean prices closed at 865.6 USc/bu, down 15Usc/bu in comparison to the previous week.

The condition of Ukraine’s winter rapeseed crop was little changed in the week ending 24 December. A marginal improvement (of 0.4% week-on-week), took the proportion of the crop rated good/satisfactory to 68.6%, down from 80.4% at the same point in time last year.

One of the watch points for oilseed markets over the last week has been the impact of improved weather in Brazil. While dryness remains widespread throughout stretches of northern and north-western Brazil, rains over the last week have helped to improve soil moisture. This has led to pressure for US soybean prices. However, additional rains are still needed to curb dryness in key growing regions.

To read the full report please click the below link.

Weekly Report 16_01_02

Weekly Report 14/11/15

Posted by | Grain Brokers Australia News, Misc, Weekly Strategy Market Update | No Comments

CORN/BARLEY

Dec 2015 CBOT corn futures fell by 12.4USc/Bu and settled at US$3.745 per bushel.

Global corn demand was forecast to decrease by 9 MMT and the negative change to the China’s demand profile by 5 MMT was a big contributor to the change. Corn demand was reduced in part due to being substituted with sorghum. The end result was a significant increase in global forecast corn carryout of more than 20MMT.

Aussie barley remains competitive into Asian homes with Western Australian FOB pricing around the US$185 level, Our barley is currently $5 – $10 over working into Saudi at replacement and while some offshore barley interest is coming to the market, no firm numbers have been shown.

BFED Chart 151114

BEANS/CANOLA

Soybean November 15 CBOT futures were unchanged for the week at 878.60USc/bu.

ICE Canola remained unchanged for the week at CA$460.6t

USDA decreased world bean stocks by 2.2 million mt, but increased US production by 2.5 million mt!!

US beans now reported 95% harvested vs. 92% last week. Brazil’s Conab raised its forecast for a the 15/16 bean crop to between 101.2 million and 102.8 million mt – up from 100.1-101.9 million estimated last month.

CAN1 Chart 151114

To read the full report please click the below link.

Weekly Report 15_11_14

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