China-Australia Barley Spat May Benefit Canada, but Some Downside Too

While Canadian barley exports may see some benefit as a result, China’s new tariff on Australian supplies will also create more uncertainty in world trade, according to an industry official.

Geoff Backman, manager of business development and markets with the Alberta Wheat and Barley Commissions, said in an email message Friday the tariff will have a number of knock-on effects, including the potential for Australian producers to switch acres out of barley and into wheat, thereby creating more competition for Canadian wheat in international markets. Additionally, that Australian barley that may have been destined for China will now have to find a new home and could battle with Canadian product for market share in other countries, such as Japan.

“. . . When countries act outside the World Trade Organization there is greater risk introduced into the global markets,” Backman said. “Continued long term success for Canadian agricultural exports depends upon rules based international trade founded in strong, recognized science.”

China earlier this week announced anti-dumping and anti-subsidy duties totalling 80.5% on Australian barley imports from May 19. The move follows a Chinese investigation that began in 2018 and is aimed at trying to protect its domestic industry. The tariffs will remain in place for five years and are expected to essentially halt the barley trade between the two countries.

Since 2014, China has annually imported between 5 million to 10 million tonnes of barley, mainly sourced from Australia, Canada, France, and Ukraine. Australia has typically been China’s largest supplier due to its relatively close proximity providing logistical advantages. Annual Australian barley exports to China have ranged from 3 million to 6.5 million tonnes. Canada has generally been the second largest supplier with annual barley exports ranging from 500,000 to 1.6 million tonnes.

With the tariff now place, Backman confirmed the potential for more Canadian export business to China. He compared the situation to 2019, when drought slashed Australia’s exportable barley supply, forcing China to come to Canada, France and Ukraine for more. The increased demand could push Canadian barley exports to China up to recent highs of over 1.6 million tonnes, he said.

Meanwhile, the Canadian barley industry has been working to garner more Chinese business, with producer and industry organizations collaborating together to promote domestic barley to the malting and brewing industry in China, Backman said. As part of those efforts, the Alberta Barley Commission hosted a delegation from China in the summer of 2018 to highlight the clean environment Canadian barley grows in, the progressive farm management practices used by Canadian farmers and various new malt varieties.

“Our strong market development activities continue and should put Canada in a position to increase our barley exports as far as our logistical system can manage,” he said.

To that end, Backman admitted any potential increase in Canadian barley exports will be mainly limited by access to rail transport. Canada exports to China through the western ports of Vancouver and Prince Rupert, and demand for rail cars to these ports are consistently greater than the available supply. For exports of barley to increase, barley would need to become more profitable to export than another commodity in order to get priority movement, he said.

Source: DePutter Publishing Ltd.

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