GLOBAL barley markets have been quite subdued and uneventful in recent weeks and appear to be in search of news that will set the tone as we enter the northern hemisphere winter.
The trade has been expecting a tender out of Saudi Arabia for the last few weeks, but nothing has been forthcoming.
The Middle East kingdom is the world’s largest importer of barley but is forecast to reduce imports to around 8 million tonne in 2017/18.
This will be down from more than 9 million tonne in the previous season.
The Saudi Arabian Grain Organisation, which has exclusive buying rights for feed barley, have indicated that they were looking to partially substitute domestic feed barley consumption with imported corn due to the uncompetitive price of barley relative to corn and other stockfeed ration alternatives.
The opportunities for corn in Saudi Arabia are huge.
Their dairy industry is state of the art by world standards and the poultry industry is expanding rapidly, supplying both the domestic market and into neighbouring Gulf countries.
One of the biggest suppliers of feed barley into Saudi Arabia is Ukraine.
Interestingly, the Ukraine farmer has been swinging spring barley area across to corn in recent years.
New varieties and vastly improved farming practices in Ukraine have significantly increased the profitability of corn relative to barley.
Whilst the global corn market is extremely competitive, Ukraine will be extremely well positioned to increase their exports as Saudi Arabia increases imports.
Currently, the world’s fourth-largest exporter of corn, further increases in production and exports could easily see Ukraine challenging for a place on the podium in the not too distant future.
Grain imports into Saudi Arabia have two primary discharge points, the Arabian Gulf port of Dammam and the Red Sea port of Jeddah.
Current international barley values see European and Black Sea origins the most competitive into Jeddah with January delivery priced at around US$220 Cost & Freight (C&F) against Australian values of around US$227 C&F.
The story is a little different into Dammam.
Australia is still trading at a premium to European and Black Sea origins but the southern hemisphere’s second largest barley producer, Argentina, is the most competitive origin for January delivery at around a US$10 discount to Australian offers and a US$5 discount to the cheapest European supplier.
In reality, much lower production here in Australia this season, compared to last, and relatively strong domestic demand means that the exportable surplus will be much lower year-on-year.
Australia will not have to chase export demand aggressively this season.
Relatively inelastic demand out of other Gulf states such as the United Arab Emirates, Kuwait and Oman will be preferred over the competitive Saudi Arabian demand.
However, China will be the key market for Australian feed barley.
Demand has been strong and Australia is currently the most competitively priced origin into that part of the world at around US$225 C&F for January delivery.