BARLEY MARKET UPDATE – JANUARY 13th 2025

SUMMARY

• Australia’s barley production has surprised the market, increasing to 12.9mmt from our November forecast of 11.1mmt (16% increase). 
• The majority of this production gain came from the WA crop. 
• Export potential has increased from 5.5mmt to 6.8mmt. 
• China’s export demand remains strong. 
• Australian barley is pricing into multiple destinations due to tight global supplies. 
• We are well priced and demand is strong. 

As we enter 2025, with known Australian production we maintain our supportive view of Australian barley. Nothing has changed demand side since our update in December, but we flag that we could be about to enter a period of limited activity. Chinese new year will commence in late January which usually coincides with a slow down in buying. This could create some local price weakness, but it’s nothing to be feared in our opinion. 

Best actions today in our view are managing currency and positioning stock in superior quality catchments behind export capabilities. 

CHINA

China set a record for barley imports in 2023/24. Importing 16 mmt from October to September. Australia supplied around 40% of this, we were their biggest supplier. It was our third largest barley export year, drawing down the record carry in stocks and leaving carryout stocks record low.

Despite this, the local barley market has been full of sellers (particularly in WA) as producers and their advisors elect to sell now, rather than deal with the political risk we have faced from China in the past. But we are not seeing that political risk play out from China’s side and see no evidence of the rumoured government limitations on barley imports. China’s October and November imports were 1.66 mmt on pace for another 12+mmt year. These numbers surprised the market, world supplies were near record lows in that timeframe and importantly Australian availability was very low and likely an overall pace/volume limitation. We’ve seen enough demand Dec Jan, and Feb to infer that the cumulative China numbers will average out over 1mmt per month and it could be the case that exports grow further in line with Australian export availability.

CURRENT DEMAND

We have seen plenty of demand around for Australian barley from Chinese buyers. Whether it’s feed or malt, they can not get their hands on enough of it. We’ve also seen Australian barley working to origins it shouldn’t, based on our available supply. At current prices we should be going entirely to China based on their price and demand, but we are also doing business into Saudi, South East Asia and South America. It appears that we could over export. 

CHINA MALT SITUATION

China has over 6.5mmt of malt production capacity. They only produce around 1.5mmt of malt/faq (fair average quality). The balance needs to be imported. The major exporting regions that feed this demand are France, Canada, and Australia. This year, the French crop is small, overpriced and under quality, which leaves Australia and Canada. Canada’s volumes are not there to sell tangible longer-term competition, which puts Australia in a strong position for the balance of this marketing year.

Maltsters in China will often buy FAQ rather than malt when the spreads are too wide. We have it on good authority (from a large malt buyer in China), that they are targeting FAQ this year, due to the malt price. But FAQ is not widely available across the country. Forcing them to go one step lower and just bid germinating feed. It is more economical for them to buy FAQ if they can get their hands on it and their price will reflect this accordingly. It usually trades a US$5-10 premium to generic feed. But what is also notable is that they’ll often buy a hatch of malt with faq. So, by selling one, you enhance the other. 

COMPETING SUPPLIERS (FEED BARLEY)

Australia, Canada, France, and Argentina are the major suppliers of barley to China. This year we’ve seen significant reductions in exportable volumes in some of these areas. We calculate a maximum available export supply of approx. 12-13mmt. Not enough to satisfy Chinese demand at current price and pace. For this to slow, the price will need to rally to kill some feed demand.

Export pace is noticeable in Australia, enough for us to forecast an eventual supply problem.  – 

TRUMP 

The last time Trump was in office, the Tariffs imposed on China resulted in them tariffing US Ags, which saw further feed demand swing into Australia. With the unregulated US Sorghum likely to draw some retaliatory tariffs, this will be supportive feed values and in turn supportive barley demand. The unregulated nature of Sorghum and Barley is important to note.

AUSTRALIA’S SUPPLY AND EXPORT PACE

The large export program and drawdown of carryout to record low stocks in 23/24 will limit available export supply (-1.1mmt) in 2024/25, despite larger production. This change in carry in stocks is the major analysis point for us, as far as market potential is concerned. In 2023/24, the massive carry in was sold prior to and during harvest, which had a capping effect on the market. This year is different already. There is no buffer, we have nothing to fall back on. The market has been complacent amidst harvest pressure, and we feel this could lead to much more volatility than we have seen recently in barley when the grower switches off.

As per the chart below, we forecast that a maximum of  6.8mmt of barley can be exported from Australia this year.  With a notable change in the distribution of exports at a state level. WA to ship 4.9mmt this year, 72% of our total exports’ vs 49% last year. But the current pace suggests a larger number.

The above chart shows cumulative barley exports from Australia over the last ten years. This year, Oct-Dec exports (stem plus containers) indicate that at least 1.5mmt will be shipped. We expect this to increase in Jan/Feb based on the demand and sales that we are witnessing. This is a notable figure. We have only shipped 1.5mmt Oct-Dec four times in the last 38 years (those times were literally the last 4 consecutive years). In those years we’ve shipped 7-8mmt.

What’s notable here is that WA has been the only real seller of bulk barley in the last 3 months. They are 75% of the Oct-Dec exports and continue to be the most aggressive seller for Jan-Feb demand. WA barley is the price leader/maker into China and this pace is dependent on a large WA program. It’s cheap for a reason, but it won’t last forever and has limited competition from other states.

So, what does that tell us for Australian barley? The pace needs to slow to sustain supply. The price needs to drive this, but it is not.. 

CURRENT PRICING / HOW WE CLOSED OFF 2024

CFR (cost & freight) container numbers look to be starting the year US$2-5 higher. We haven’t seen a huge amount of bulk numbers since the commencement of 2025, but below is how we finished. 

Feed was worth US$250 CFR, FAQ (fair avg quality) around $260 CFR and malt $268 CFR with new demand showing up quite regularly. 

We’d recently done between 2-4 cargoes into Saudi. Recent Jordan values were very close to China parity. We were also seeing feed barley work in combination with wheat into Thailand. On top of that we saw a malt tender for South America, which was won out of Australia.

The increase in WA’s crop has suppressed the market somewhat, but the demand did not respond to this in any way. This is a demand driven market and we expect to see a demand driven rally at some stage in Q1 when grower liquidity dries up.

Flexi Grain 

In September last year we exported our first CFR malt/faq cargo to China which was a significant milestone for Flexi Grain and our growers. Having gone through the extensive registration process we have now proven ourselves to the buyers in China and they are now demonstrating their overwhelming demand, demand for prompt barley of reasonable quality. 

OUR STRATEGY

GENERAL

We are supportive of the value of barley, based on all of the factors mentioned above, with different strategies applicable to each state. Currency management is a great opportunity today (up to 60% is our view, looking to increase on any further declines). 

We’re aggregating malt and feed barley parcels while managing the currency and letting this demand story play out. 

SA

Due to the high protein content of feed, SA barley will struggle to service the FAQ market in China, but there are still great opportunities for exporting feed. Malt stands out as a great value proposition, especially for growers in catchments where spreads are very poor. As per CFR prices above, malt barley is worth around US$18 over feed landed China. The value has fallen a lot locally and we believe it’s a very good pooling opportunity when it gets to feed pricing.

 AVAILABLE SUPPLY VS DEMAND

Exportable supplies on the East Coast are down significantly year on year. Carryout is very tight, but supply is balanced. Production declines in Victoria are offset by the gains in NSW. 

We don’t feel that supply can stay balanced for too long. Container business is racing out of Melbourne from SNSW. We’ve seen malt cargoes out of Newcastle and a recent FAQ malt out of Kembla. We are starting to see the local consumer step in which is seeing barley strengthen slightly over wheat in Western areas already. We don’t think this stops, in fact, we could see barley price over wheat as this SnD (supply & demand) plays out. The market has seen significant grower liquidity ex Southern NSW, but once this slows the market will feel it. On both exports and domestic demand.

We think that export demand will put pressure on available supplies, and the current price is not behaving in a way to deter it. Especially considering the potential for increased domestic demand, taking note of the record cattle of feed numbers. There could be a point where both the domestic and offshore buyer come together at the same time, which will support the price 

Flexi Grain 2024/25 Tonnage contracts are still open with deferred payment terms available, for more information, click through the following link or contact your Regional Manager.