February 6 – For International Barley Prices, It’s All About China

China may be single-handedly be supporting the nice barley prices the market has been seeing.

But can we trust these prices?

China may be single-handedly be supporting the decent international barley prices the market has been seeing.

Thanks to a high Chinese demand, the world is sitting comfy when it comes to barley prices. This is helping at least UK farmers get good returns on their malting barley.

Price and premiums for malting barley have been coasting for some time, while the UK wheat market has been feeling the heat of oversupply.

While feed barley exports are performing well, wheat has started to fall behind.

And while the small supply of feed barley is making for good prices. The world demand wasn’t expected to tip much, so the increased Chinese demand came as a surprise.

It’s unclear how long a small supply will last, though. A 2018 EU forecast for malting barley cites an increase in acres could lead to surpluses in the UK, Scandinavia and France.

But for right now, increased international prices are welcomed. Even European prices have increased despite the strong Eurodollar.

Further, Russia barley prices have surpassed wheat prices, reflecting on the Chinese demand.

The UK is experiencing the same narrowing gap between their barley and wheat prices. However, their reason is due to alternative bio-products like wheat feed and med-proteins increased in price. There’s also good demand in Ireland and Spain. Scotland is supporting good premiums as well. London futures prices just can’t compete. 

For now, it’s important to capitalize on the opportunities right now. There’s always the option of waiting, but with demand seeing such a steep increase, it may plateau just as quickly. Don’t wait until the supply diminishes again because then there’s the risk of the demand being satiated.

Bringing this back to the North American marketplace, we’ve seen relatively strong barley production in the past few years, and as a result, the oversupply has pushed prices lower.

At the same time, we’ve seen the demand structure for feed grains increase a bit, both on the domestic front, but also that which is being exported, namely into China.

This past fall, I sat on the Canadian Barley Task Force, a group of farmers and industry professionals from all levels of the barley sector that was organized to talk about the future of barley in Canada. 

One of the most agreeable takeaways from the conversations – from feed barley buyers to malsters to exporters to analysts – was that China will continue to increase the amount of barley they consume. The problem is that they are extremely price-sensitive, especially as it relates to malt barley.

Thus, we know that China will continue to the main export market that Canadian barley should be going into, but only if the price is right.

Today, with high prices out of Australia because of the smaller crop there, it does seem the price for Canadian barley is acceptable to Chinese buyers.  


China demand props up barley prices, with malting premiums firm on top

UK farmers are seeing good returns on malting barley, helped by firm premiums on top of a world barley price which has been supported by higher-than-anticipated Chinese demand.

Malting barley premiums and prices have remained very good, leading commentators said.

And feed barley has been “holding its own” in export markets while the UK wheat market has remained under pressure.

But an increased European Union malting barley area forecast for the 2018 crop was expected to lead to large surpluses across the UK, Scandinavia and France.

Tight supply

For feed barley, prices should continue to be supported by the tight supply which seemed to be developing across Europe, said Sam Scott, grain buyer at Cefetra, the UK merchant owned by Germany’s BayWa.

Globally, demand had been expected to be well-balanced, but larger-than-anticipated Chinese demand has driven international prices up and European prices have increased, despite a firmer euro.

Separately, it emerged on Monday that Russian barley prices have overtaken those of wheat – a reflection of strong Chinese buying from the world market, at a time when Russia’s wheat prices are depressed in an effort to shift its huge exportable surplus.

According to Ikar, wheat prices – at $195 a tonne for standard 12.5% protein export grade, on an FOB basis – have fallen behind the $199 a tonne achieved for barley.

Rival analysis group SovEcon put barley prices at $198 a tonne, up $3.50 a tonne week on week.

‘Challenging to find sellers’

At rival UK merchant Gleadell, trading director Jonathan Lane said: “Recent tenders to the Middle East and slowdown in Russian availability appears to have cleared out the markets longs and it has become challenging to find new first-hand sellers at previous levels.”

In the UK, the differential between barley and wheat has narrowed as alternative bio-products, such as wheat feed and mid-proteins, have moved sharply up in price.

“We continue to see good underlying support from the export markets into Ireland and Spain, and while the wheat market remains under pressure, feed barley is holding its own,” Mr Lane said.

‘Supported by premiums’

Mr Scott added: “Wheat in Scotland also remains heavily supported by premiums, with ex-farm prices offering growers good opportunities to sell well above London futures.

“The speculative fund short in agricultural commodities has been well-documented and there will at some point be some covering of position, we have seen a small amount already, although the effect on the UK market may be offset by a strengthening pound.”

H/T: Agrimoney
About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.