The barley market hits four-year highs…….

Grain | 5th March 2024 | By Andrew Whitelaw

The Snapshot

  • The barley market has the biggest premium to French barley since 2019.
  • This has only occurred since China came back into the market.
  • Due to lower nutritional value, feed barley tends to have a discount on wheat.
  • The discount to barley from wheat was consistently higher during the time of the Chinese barley tariff.
  • The discount has returned to more normal levels.

The Detail

Overall, the grain market in Australia has been on a downward slope, but barley, in some ways, has travelled in the opposite direction.

We like to compare commodities against one another. We can talk about how much the price of a commodity changes, but we also think it’s as important to talk about how it has changed relative to other points.

This gives us a better indication of the relative value of a commodity. So let’s start with French Barley versus Australian barley.

Australian barley has averaged an average discount of 20% to French barley since the turn of the decade. The current premium is now 20%, although this premium is stronger in the export-dominated Kwinana zone, with other states showing much smaller premiums.

The Aussie premium disappeared the month the tariff was introduced and returned, funnily enough, on the month China returned to the market.

Let’s take a look at barley in comparison to wheat. This is an important relationship to look at, as wheat and barley in many cases (not all) can be substituted for one another. Barley will always tend to be at a discount because, nutritionally, it is not as good as wheat in a feed ration.

It is how much the discount moves to which gives us an indication of the value of it. During the time of the Chinese tariff, the spread hit record levels and stayed at strong discounts for longer than usual.

The discount has now moved to 10-15% this year, which is an improvement from previous years when it was closer to 20%.

So, our premium to French barley is returning to very strong levels, and our discount to wheat is returning to more normal levels.