Double-edged sword

When you remember we used to transport our convicts to Australia, it is ironic that China has just effectively imposed a “penal servitude” tax on Australian barley imports, coupled with a “five years hard labour” imposition period. It is because of historic “anti-dumping” issues, coupled more recently with the Australian stance on the origins of the pandemic. This has excited the feed barley market in France, as they see themselves taking Australia’s seat at the Chinese import table.

In my opinion it’s simply a re-routing of the world feed barley supply chain. It means that the Australian barley, which would have been going to China, will now head for Saudi Arabia instead. France, which has the right protocols on quality to be able to sell to China, will replace Australia. A further irony is that in China all sorts of creatures are eaten that we would not touch, yet a few seeds of sterile brome in a barley cargo would see it rejected there.

Anyway, that should have left the traditional North African trade to Morocco, Algeria and Tunisia more open to the UK. Openfield, with its deep-water export facility at Portbury, has led the way in big boat exports to these countries, and will continue to do so. However, for the first time in living memory, Spain is forecast to produce over 11 million tonnes of barley. If you check out the close proximity of Gibraltar to the North African coast, you will see why Spain is now the main contender to supply North Africa. Actually, it’s a double-edged sword, because Spain is one of the UK’s best traditional customers for barley coasters. So ‘the rain in Spain really has made the grain’ this time. While all of this ‘re-routing’ has put a few extra pounds on the UK feed barley price, I don’t believe it will change the bigger world barley picture; there will be no increased demand, but probably more supply.

In a year, subject to weather, when the UK is heading for a barley crop of seven and a half to eight million tonnes, I still think it would be better to put the feed barley, which you usually sell cheaply for as available movement, to the back of the barn and sell some early wheat or, if you have it, oilseed instead. Wheat will always have a ceiling of the minimum import price, whereas feed barley, especially between harvest and Christmas, has no bottom. In dollar terms our barley, because it’s cheapish, is competitive. So as long as we can ship several big boats, after harvest, by January or February 2021, we should be getting through our surplus. That is why I favour that period to bring your barley back to market. Also, and I hope I am wrong, you will probably be able to fit all of your wheat in the store, this year anyway. So better to sell something for cash or space, which at least makes you a margin, rather than harvest barley.

Weak sterling has helped to improve all UK values old and new, touching an exchange rate of 89.5p against the Euro this week. This is mainly due to the renewed talk about the UK finally leaving the European Union on the 31 December, without an agreement on trade tariffs. Increased unemployment and other bad business news have also pushed the pound lower.

With all the subsidies handed out by the Government because of the pandemic, there is little appetite – or money – for extending our European Union membership even for three months to March. So, I am now thinking that we will be leaving on the 31 December. That will still prevent the UK from selling barley to the European Union for shipment after December, without huge risk of large tariffs being imposed. This at a time when the UK may have two and a half to three million tonnes of exportable surplus!

The latest USDA world supply and demand estimates show increases in wheat, maize and barley stocks at the end of June 2020, with Russia, India and China all holding on to more wheat stocks as nations are now concerned about food supply security. The combined world stock-to-use ratio is a very comfortable 37%. The maize crop in America is set for a huge rebound as last year’s “prevent plant” acres come back in. When they stopped driving cars in March the ethanol demand “fell off a cliff” and it’s only just starting to recover. But they use one-third of the US maize crop, about 140 million tonnes, making ethanol. This means there will be a huge amount of extra corn competing with feed wheat and barley. The UK has already purchased Canadian maize for September, which incidentally is levy free, and more will follow. This, and the minimum imported price of feed wheat, will still dictate your ex-farm feed wheat price, not how much you finally combine.

Some say that the Northern Hemisphere crops are now developed enough to be safe from adverse weather. We have had good growing conditions of late but still need regular rain. Also, most of the problems are caused in Russia, Ukraine and around the Black Sea by summer drought in June and July, and they still need rain. You have good forward prices for feed wheat and excellent prices for milling wheat, if you are brave enough to sell. You probably have the best wheat prices in the world so if you are confident in your crop keep selling; and don’t forget with the biggest potential wheat planting we have ever seen this Autumn you should be selling some harvest 2021 now.