With malt barley now cheaper than feed barley in the Land Down Undaa, what does this mean for Australian barley acres in 2018?
Earlier this week, the Australian Bureau of Agricultural and Resource Economics and Sciences (or ABARES for short) came out with their forecasts for 2018/19 grain, oilseed, and pulse crop production in the Land Down Undaa, as well as around the world.
Looking big picture first, ABARES forecasts that in 2018/19, world barley production will edge higher by 4% from 2017/18 to 148 million tonnes. The trigger for the increase in world production is really tied to one thing: prices. Supply will intuitively chase higher prices and so acres are going up around the world.
This past year, in 2017/18, Australian barley acres plummeted by almost 4% from the previous year to 9.5 million acres. The ABARES forecast though for the coming 2018/19 crop season is for Australian acreage to expand again to nearly 10 million acres.
How about the Australian production expectations?
ABARES pegs Australian barley yield in 2018/19 at 41.8 bu/ac. This is down from the 2017/18 yield of 42.8 bu/ac and 2016/17’s record high of 61.8 bu/ac.
Comparably, here in North America, Agriculture Canada pegged Canadian barley yields in 2017/18 and 2018/19 at 69.4 bu/ac and 68.95 bu/ac respectively. The 5-year average sits at roughly 67.8 bu/ac.
Similarly, its sister agency south of the border, the USDA, reported a 72.6 bu/ac for the US barley yield in 2017/18. The 5-year average is estimated at 72.73 bu/ac.
It is clear that the Australian barley yield lags behind those recorded here in North America, as shown on the chart.
All in all, Australia’s barley production in 2018/19 is expected to edge higher to 9 million tonnes.
Other than prices being too good to ignore, a couple other reasons for the acreage increase includes depleted interest in planting pulses (thanks, India!) and crop rotation constraints.
Over the next five years through the 2022/23 crop year, ABARES is forecasting Australian barley acreage and production to stick around 10 million acres and 9 million tonnes respectively (see chart below).
With that sort of production, this will keep Australian barley as one of the go-to sourcing options for international buyers over the next five years.
As such, if Australian barley production is expected to return to more normalized levels, both us and ABARES are guaranteeing that Australian barley exports return to more normalized levels as well! In fact, Australian barley exports are expected to jump 7% in 2018/19 from the current crop year.
Specifically, for the 2018/19 crop year though, ABARES is forecasting international demand for Australian barley to remain strong, especially feed going into China and malt into other Asian markets.
This will intuitively challenge the exportability of Canadian barley as Aussie markets tend to have the geographic advantage to sell into these Asian markets. One of the strong catalysts for Canadian barley exports being so strong this year is because of the smaller crop in Australia limiting their exports.
Thus, moving into the 2018/19 growing season, we are cognizant of more downside risk to Canadian and American barley prices, especially Canadian barley.
You should be too!