Ukraine’s barley trade eyes US-China phase 1 sorghum impact

3 Mar 2020 | Masha Belikova

Ukraine’s barley exporters fear the industry could see less interest from China for its new crop as the key destination market substitutes barley demand for sorghum against the backdrop of the phase one trade deal with the US, market sources have told Agricensus.

China is thought to have already booked up to six cargoes from the new crop, but the trade expects competition with sorghum will limit demand through the marketing year.

“This is the pressure on barley; China will continue to buy barley, as it can be 100% substituted, but it’s more about the price, and a guess is that they will buy less compared to last year,” one Ukraine-based trader said.

Market sources say at least three and as many as six cargoes have been sold to China in recent weeks, before prices collapsed as commodity and agriculture markets responded to the onset of Covid-19.

Since then, the plunging prices hasn’t sparked any further buying, while rumours abound that China many have bought as many as 10 cargoes of sorghum out of the US Gulf.

“US sorghum will be an obstacle this year. I think Ukrainian barley sellers to China should worry a bit,” one broker added.

China and the US agreed a phase one trade deal in a breakthrough agreement that suspended a long-running trade dispute.

Under the terms of the deal, China agreed to boost its imports of US agriculture products such as soybeans, corn, DDGS, ethanol, and sorghum to $40 billion.

Rumours that Chinese sources had bought US sorghum surfaced in late February, with USDA net sales data showing 444,500 mt selling in the week ending February 20, 119,000 mt explicitly listed to China with most of the balance – 324,200 mt – listed to unknown destinations.

However, market sources felt the bulk, if not all the buying, would also be for China, with the country lifting 69,313 mt of sorghum in the week ending February 27, according to export inspection data.

Trade sources say that, for now, there remains demand still for Ukraine’s barley from China, but at much lower levels, with further demand potentially also being edged out should China use up all its tariff rate quota for corn.

“If they (China) were to buy US sorghum and full TRQ corn, then they shouldn't need to buy much barley,” a third source commented.

Sorghum is the main substitute for barley and, while corn cannot be used as a straight swap for barley, there is speculation that China could make additional purchases of corn due to the relatively high price of barley.

The competition with sorghum comes as the grain is among others that feature in an exemption list with only a 2% import tariff levied, with speculation mounting as the price of the grain falls relative to barley.

China’s total imports of sorghum in 2019 stands at around 640,000 mt, with the country thought to have booked at least 200,000-300,000 mt of sorghum just in the early part of 2019.

Between July and September 2019, Ukraine shipped around 872,000 mt of barley to China, more than twice the 380,700 mt exported in the whole of the 2018/29 marketing year, according to customs data.