China accelerates purchases of Argentine barley: brokerage

China is accelerating purchases of Argentine barley to offset the loss of supply from Australia amid rising diplomatic and trade tensions between the two nations, Agustin Baque, foreign trade manager at Argentine grain brokerage firm Alea y Cía. S.A, told Agricensus.

Baque said that China is expected to import at least 250,000 mt of barley from Argentina during 2020, with the figure expected to rise next year.

“For 2021, China has so far committed to import 350,000 mt of barley from Argentina, of which 180,000 will be malting barley. I estimate that China could probably import a total of 800,000 mt of barley next year,” Baque said.

Argentina will end this crop cycle with much higher barley ending stocks despite a drop in domestic plantings as exports slowed due to the Covid-19 pandemic, according to a report by the Rosario grain exchange (BCR).

According to the Rosario Grain Exchange (BCR), Argentina produced 3.8 million mt of barley in the 2019/20 crop cycle, down versus the 5.1 million mt produced in the previous cycle, with exports expected to slide 35% to 2.2 million mt in the 2019/20 cycle.

That compares with an average of 2.6 million mt over the last five crop cycles, according to the BCR report.

Baque puts Argentina’s barley production at 3.49 million mt in 2020/21 from a planted area of 850,000 ha, while exports are expected to reach 2.5 million mt, while domestic demand will consume 1.3 million mt.

That is likely to see barley ending stocks reach 390,000 mt by the end of the 2020/21 cycle, the analyst said.

In May, China hit Australian barley imports with a punitive 80% import tariff after it concluded an antidumping investigation that had been running since November 2018.

As one of the region’s biggest producers of barley, the loss of access to China’s import market is likely to force Australian supply into other origins. 

“Australia, with an estimated barley production of 10.5-11 million mt, needs to find other markets to compensate for the lack of shipments to China,” Baque noted, with Australia typically the main supplier of barley to China. 

“I believe that Australia will seek to cover the Saudi Arabia market, which is a market that Argentina usually covers between November and June. However, lower Argentine exports to Saudi Arabia will be balanced with these higher exports to the Chinese market,” Baque said.

Australia could also seek to export barley to certain South American markets such as Ecuador and Peru, although big importers like Brazil and Colombia also impose high import taxes that would make it difficult for Australian barley to gain access.

Typically, the main markets for Argentine barley exports are Saudi Arabia, Brazil, Colombia, Kuwait, China, the United Arab Emirates and Peru.