CBH was yesterday informed that the Chinese customs department had suspended the import of barley by CBH. It is important to clarify that this applies to CBH marketing, it is not a blanket ban on all barley flowing through the CBH logistics network.
China has complained that cargoes (sent prior to the tariff) were contaminated with excessive volumes of weed seeds. This allegation is refuted by CBH and having spent time in WA, the quality control in the CBH supply chain is second to none.
The claim is an example of ‘kicking a man when he is down.’, the trade with China was virtually closed with the imposition of an 80.5% tariff on exports.
This does, however, reiterate the point that China as a destination is closed. In an early EP3 article, “A battle ahead for barley”, we briefly covered the challenge ahead for barley with the absence of China.
This challenge can be seen in the chart below, which shows the split between malt and feed barley exports to China.
At present there is already reduced demand for malt on a global level due to the continued lockdowns, which is depressing malt premiums over feed. There are potential new markets with India for malt, however these are unlikely to fill the full void and will be a longer term proposition.
The impact is being felt with barley dropping A$10 between on Tuesday in the west. Whereas the falls on the east coast were less harsh at A$1-3.
As the new season approaches with what is likely to be bountiful supplies, as a nation, we will need to either find new pathways or prepare for larger stockpiles.
Overall the news from yesterday regarding this ban really doesn’t change the situation. We were economically shut out of trade with China due to tariffs, this just reiterates that block.