Australia: Barley cash prices – the SA versus Victoria argument

ABB announced on December 15 that there’s been considerable debate (and misinformation) recently surrounding claims that SA grain growers are consistently getting significantly lower cash prices for barley compared to those interstate.

If this was the situation surely traders would seize opportunities to buy barley from SA and move it into interstate markets and make a margin. But the fact is that numerous traders have withdrawn from markets not only in SA but in the deregulated states of Vic. and NSW.

Much of the recent debate came from a decision by one of these traders, Brooks Grain, when on November 29 they withdrew barley prices in eastern Australia (including SA).

Let’s be quite clear, Brooks’ decision was a commercial decision regarding an inability to obtain new contracts and it is their commercial prerogative to do so. But it had nothing to do with ABB’s legislated responsibility for the Single Desk in SA as one Brooks’ staffer claimed.

Brooks’ withdrawal from buying barley illustrates how fickle the cash market can be. Cash benefits some growers, at some sites, at certain times.

Most of Australia’s domestic demand is focused along the east coast in Victoria, NSW and southern Queensland. Cash prices dominate due to the strength and size of local markets.

Intensive livestock industries such as dairy, poultry and pig industries often cause demand for feed grain to outstrip production in Victoria, pushing up prices. In contrast, SA exports up to 90% of its barley harvest. Because of this, our proximity to the eastern states is particularly influential with prices, as some SA areas are closer to the Victorian/NSW domestic market.

This harvest, many growers have delivered higher percentages of their grain to cash, rather than pools, to get some cash flow and because, initially, cash prices before harvest were a relatively attractive option.

Australia’s grain harvest this year was later beginning and was delayed by wet weather several times. This enabled all buyers to hold prices higher, longer.

In the past fortnight, considerable malt and feed barley has come onto the market – far more than could be absorbed by the international marketplace. Late November buyers pulled back prices to stem the flow of grain being offered for sale and reduce risks.

Established trading companies like ABB have prudential limits within which we must operate. Trading companies cannot continue buying grain while increasingly exposing themselves beyond their limits.

As managers of the single desk, ABB is obligated to always have a barley pool open in SA – meaning there will always be a market for your barley while the single desk exists.

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