A bumper barley crop in Australia has resulted in favorable prospects for the brewing and malting industry in the region which can expect lower prices and a good quality.
New South Wales (NSW), which was most affected by a drought, has also seen the most dramatic turnaround after drought-breaking rains. The Australian Bureau of Agricultural and Resource Economics and Sciences is forecasting the largest wheat crop in NSW in over a decade with a crop of 10.3 million tons, more than fives 5 times more than in the two previous seasons.
Total barley production in Australia for 2020/21 is also estimated to be 14% higher than last year. According to the forecasts barley production will reach 10.3 million tons. Prices have come down sharply with the big crop.
In a normal year, Australia produces about nine million tons of barley per annum, thereof on average of around 2 to 2.5 million tons of malting barley and over 6 million tons of barley mainly for animal feed use. The average Australian malting selection rate is the highest of the world’s exporting nations with around 30-40 % of the barley national crop selected as malting quality.
Since domestic use of barely is restricted, around 70% of the normal barley crop is exported, mainly to Asia. Australia normally supplies around 30-40% of the global surplus malting barley trade and about 20% of the global surplus feed.
Next grain year, Australian barley exports are forecast 4.4 million tons, an increase of 30% compared to the previous year.
However, a constraining factor is the 80.5% tariff on Australian barley imposed by China’s commerce ministry in May 2020 (inside.beer, 11.5.2020). China typically accounts for about two thirds of Australia’s barley exports.
"If they can't or won't take feed barley from Australia, they have to replace it with something else," Mark Palmquist Chief executive of one of Australia’s leading maltings United Malt Group was quoted by The Australian Financial Review. He also stated that China's heavy demand for US corn had pushed up barley prices in Canada where both locally grown barley and corn from across the border in the US are used to feed livestock.
The lower barley prices in Australia helps United Malt to cope with the negative consequences of the ongoing COVID-19 pandemic. Full-year earnings before interest, tax, depreciation and amortization slumped by 11 per cent to AUD 156.1 million (USD 115 m) as the virus forced pubs and clubs in its key markets to close and big sporting and other entertainment events were cancelled. Sales volumes of United Malt are currently only 90 percent of pre-COVID-19 levels.
“While off-premise consumption increased, this was not sufficient to mitigate the decline in on-premise consumption,” Palmquist said.
“We have implemented necessary changes to how we operate our production and warehouse facilities to align costs with demand, including staff redeployment, some curtailment of capacity and managing more frequent ordering patterns."