China’s decision to scrap tariffs on Australian barley is set to shake up global trade, with the return of the supplier heating up competition with other exporters for a chunk of the world’s biggest import market.
(Bloomberg) — China’s decision to scrap tariffs on Australian barley is set to shake up global trade, with the return of the supplier heating up competition with other exporters for a chunk of the world’s biggest import market.
Australia once supplied as much as 70% of China’s barley imports before Beijing slapped hefty duties on the country’s shipments in 2020, cutting off a market worth more than A$1 billion ($660 million) a year. China shifted to buy more of the grain from France, Canada and Argentina in the past three years, while Australia sought alternative markets, such as Saudi Arabia.
“Currently, the price of barley in China is determined by the cost of barley in France plus freight charges,” said Stefan Meyer, senior cash grains broker at StoneX Group in Sydney. With Australia “being significantly closer to China, this could potentially reshape the market dynamics,” he said by email.
China last week scrapped tariffs on Australian barley in a further sign of improving bilateral relations. The country imposed duties more than three years ago, at a time when ties were spiraling downward.
Top importer China and No. 2 buyer Saudi Arabia together account for about 45% of international trade, according to the US Department of Agriculture.
Saudi has traditionally bought from Russia, but Australia has been vying for market share after it was shut out of China. With China’s tariffs lifting, Australia may no longer have to compete with Russia in the Saudi market.
China Caution
Still, Australian barley exporters will remain cautious of rushing back into China. Many have found new markets, and increased shipments to countries such as Saudi Arabia, Japan, Vietnam, Kuwait and Mexico.
“I think most farmers have a realistic understanding that future disruptions in trade to China are possible,” said Tracy Lefroy, a barley grower in Western Australia. “I would like to think there will be ongoing efforts to diversify export destinations and thereby reduce our dependency on any single market.”
China’s tariffs meant many Australian growers replaced barley for larger wheat plantings, Lefroy said. “With the reopening of the China market, barley growers might adjust their production plans to meet the potential increase in demand.”
“Malt barley is one of our most profitable crops on a per hectare basis, and with the re-opening of the China market, we are keen to capitalise on this opportunity,” Lefroy said.
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