Expectations for China's corn and soybean imports may be in
decline, but not those for its barley purchases – leading it into "increasing"
competition with other buyers, and supporting prices.
The country is expected to import a record 2.7m tonnes of
barley this season, following a poor domestic harvest.
And even assuming better yields this year, purchases will
not decline much in 2014-15, to 2.5m tonnes, the International Grains Council
said, lifting its estimate for China's imports by 100,000 tonnes.
That volume is second only to Saudi Arabia's imports, estimated
at 9.0m tonnes, with Japan ranked the third-biggest buyer with volumes of 1.3m
Unlike Saudi Arabia, which uses barley for feed, China's
consumption is primarily for food and alcohol purposes, including as a base for
the popular local spirit baiju, which can also be made from the likes of
China is also the world's top beer drinking country.
Nonetheless, Chinese maltsters' willingness to rely on lower
quality barley, rather than just grain specified in Western exporting countries
as malting grade, means its growing imports are weighing on supplies of feed
"China's purchases are increasingly affecting feed and other
non-malting grade barley markets," the IGC said.
China's purchases of non-malting barley such Australia's "fair
average quality", or FAQ, grade has put it "into direct competition, not just
with malting barley buyers, but with feed barley purchasers, such as Saudi Arabia
and Iran, and the major food barley buyer, Japan".
China's barley import needs are being spurred by a decrease
in domestic production and, indeed, the IGC slashed its forecast for the
country's 2014 harvest by 600,000 tonnes to 1.7m tonnes, a 29% decline year on
"Government moves to bolster wheat, corn and rice production
has led to a move away from barley, which does not receive price support," the
However, the grain has fallen out of favour in many exporting
countries too, with the IGC also cutting its estimate for production in Canada,
one of the top exporters, by 1.4m tonnes to 9.8m tonnes, citing reduced sowings
and an assumption of yields lower than last year's bumper levels.
That would be Canada's third-lowest barley harvest since the
Statistics Canada last week estimated Canada's barley
sowings at 6.31m acres, down 773,000 acres year on year, and below the
expectations of most analysts, some of whom had forecast a rise in acreage.
The squeeze on barley supplies, which the IGC sees cutting
world stocks by 2.6m tonnes to 24.8m tonnes by the close of 2014-15, has been
reflected in prices, which have outperformed those of wheat.
On the Paris futures market, for instance, malting barley
prices have risen by 9% over the past month, compared with a small fall in
milling wheat values, on November basis,
Malting barley's premium over milling wheat has risen to 18%,
from 7% a month ago.
The CWB - the former export monopoly for grains including
barley from Canada's Prairies – last week highlighted the role of China in
supporting malting barley prices.
"International malting barley prices have remained stable…
as a result of the continued demand by China for malting barley and the decline
in world barley seeded acres," the CWB said.
It kept at Can$280.00 a tonne its forecast for prices to
farmers for malting barley contributed to its pools, while cutting by Can$8-9 a
tonne its forecast for payouts for wheat.