Australia: Australia set for third consecutive record grain crop - USDA

Australia is set for a third consecutive record grain crop, and strong exports. Wheat production is estimated to have reached a record 37 million metric tons (MMT) in marketing year (MY) 2022/23, while barley is estimated to achieve 13.5 MMT of production, the fourth largest on record, USDA/FAS reported on January 26.

The wheat and barley results were strongly supported by near ideal conditions in Western Australia and South Australia, but this was partially offset by excessive rains in much of the grain-growing regions of New South Wales and Victoria in September and October 2022.

FAS/Canberra’s barley production estimate is 13.5 MMT, 100,000 MT above the official USDA official estimate for MY 2022/23. This is a 406,000 MT decline from the MY 2021/22 estimate, but if realized, the MY 2022/23 crop would still be the fourth largest on record with the largest being 14.6 MMT recently set in MY 2020/21.

The big rise in canola prices over the last two years, along with ample sub-surface moisture at the start of planting, has driven a large increase in planted area of canola and to a lesser degree wheat. This has been at the expense of the barley planted area. Over the last two years the planted area of wheat has been high at around 3-4 times that for barley and canola. Wheat is the preferred winter grain crop as it is seen as the best reward for risk crop over barley.

Despite China imposing an 80.5 percent duty on imports from May 18, 2020, for a period of five years, the last three years have produced three of the four largest barley crops on record, and the duties seem to have had limited impact on farmers sentiment towards continuing to use barley in their crop rotations. If not for the high canola prices over recent years, there may have been a bigger planted area of barley over recent years.

Western Australia and South Australia had near ideal winter crop growing conditions for MY 2022/23 producing record results. However, similar to wheat, barley crops mainly in New South Wales and northern Victoria were impacted by large rainfalls in September and October 2022 which led to flooding and fungal disease infestations. This had an impact on the quality of barley grain, however most of the barley produced in New South Wales is typically for feed grain, mainly supplying beef feedlots and dairy farm requirements in the eastern states of Australia. The livestock industry requires good quality feed grains in their rations to maintain high energy density, so some of the downgraded feed barley will not be of adequate quality for the livestock industry and will instead be exported.

FAS/Canberra’s barley consumption estimate for MY 2022/23 is 6 MMT, in line with the official USDA estimate and MY 2021/22. Domestic consumption for malting purposes is relatively stable with livestock feed consumption being the main variant from year to year.

Similar to feed wheat, the beef cattle industry is a major feed barley grain consumer. The beef cattle industry has broadly had very good pasture production over the last three years. Based on current conditions and rainfall forecasts in the coming months, strong pasture production is expected to carry through into MY 2022/23. As mentioned earlier for wheat consumption, with these pasture production conditions there is little expectation of any significant change in livestock feed grain demand for 2022/23. There is also no expectation of substituting one grain for another as there is no significant relative price shifts between the feed grains anticipated. On this basis, a similar feed barley consumption of 4.5 MMT is estimated for MY 2022/23.

Domestic barley consumption for malt production has been relatively stable over recent years at around 1.5 MMT. This volume of consumption is not expected to change for MY 2022/23.

FAS/Canberra’s consumption estimate for MY 2022/23 is 6 MMT, 300,000 MT higher than the official USDA estimate. This variance is due to FAS/Canberra having a higher feed consumption estimate.
Australia’s barley exports for MY 2022/23 are estimated at 8.0 MMT, 500,000 MT higher than the official USDA estimate but in line with the outcome for MY 2021/22. Although the forecast for MY 2022/23 barley production is moderately lower (400,000 MT) than the previous year, with relatively high opening stocks due to high production over the previous two years and strong global demand, the pace of exports is expected to remain strong.

Since MY 2019/20, when the full impact of China’s Commerce Ministry imposing an 80.5 percent duty on Australian barley in May 2020 started to become evident, Australia has diversified its barley export destinations. Over the last two marketing years (MY 2020/21 and MY 2021/22) export destinations have been stable with Saudi Arabia being the major destination followed by Japan and Vietnam. Combined they have accounted for 60 percent of overall exports. The top 10 export destinations have almost all been to the Middle East and Asia.

With another big year of barley production in MY 2022/23 combined with an anticipation of continued strong world demand for feed grains and a spread of export customers established, there is industry confidence that exports will remain strong in line with recent past results. Exports in the first month of MY 2022/23 (November 2022) have started strongly at a little below the same month in the previous year but are well above the results for the previous 10 years.

Exports for MY 2021/22 were 8.0 MMT and in line with the official USDA estimate. The final result is a little lower than earlier estimates which related to an unexpected low export result for October 2022.

Nevertheless, this is the third largest barely export year on record, with the largest being 9.2 MMT in MY 2016/17 and the second highest of 8.3 MMT in MY 2020/21.

Australia’s ending stocks of barley in MY 2022/23 are expected to decline by 500,000 MT as a result of another big year of exports anticipated along with an expected 400,000 MT decline in production, while consumption remains stable.

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