- Value of Australian barley production and exports forecast to reach record high in 2021–22.
- Highest Australian barley harvest on record and above average sorghum production expected in 2021–22.
- High coarse grain prices are forecast to continue, reflecting strong world demand and tight supply.
The gross value of barley production is forecast to increase by 23% in 2021–22 to a record $3.8 billion. The gross value of sorghum production is forecast to increase to $880 million in 2021–22, more than double the 5-year average to 2020–21. These increases in value reflect record barley production and above-average sorghum production, coupled with high world grain prices.
In 2022–23, the value of barley and sorghum production is expected to soften but remain above average. The value of barley production is forecast to fall to $2.9 billion, and for sorghum to $535 million. Production is expected to decrease following 2 consecutive high-production years under an expectation of more average rainfall. High world prices are also expected to ease. If the pace of the global economic recovery is slowed because of ongoing COVID-19 related supply chain disruptions, world prices could remain elevated in 2022–23 due to higher input and freight costs. This edition of the Agricultural Commodities Report considers both scenarios over the outlook period to 2026–27 (see the Agricultural overview for a full explanation).
Over the outlook period to 2026–27, the value of barley production is forecast to range from $2.3 billion to $2.7 billion and the value of sorghum production is forecast to range from $360 million to $470 million. The range of forecast outcomes are driven by fluctuating seasonal conditions and changes in world prices based on the pace of global economic recovery.
The value of barley exports is forecast to reach a record high of $3 billion in 2021–22, 72% above the 5-year average to 2020–21 of $1.7 billion. The value of sorghum exports is forecast to increase to $660 million in 2021–22, the highest value on record. High export values forecast for 2021–22 are driven by high world grain prices and an increase in grain available for export.
Record barley production and favourable conditions for the summer cropping season are expected to result in a significant exportable surplus in 2021–22. Barley exports are forecast to increase to 8.7 million tonnes in 2021–22. Chinese tariffs on Australian barley have led to Australian barley trading below world indicator prices. As a result of the lower price, demand for Australian barley is likely to remain strong. Sorghum exports are forecast to increase to 1.7 million tonnes in 2021–22, supported by robust demand from China.
Even though grain prices are expected to remain strong in 2022–23, the value of barley and sorghum exports is expected to fall in line with a decrease in export volumes reflecting expectations of more average rainfall. The value of barley exports is forecast to decrease to $2.3 billion, and for sorghum to $435 million in 2022–23.
Over the outlook period to 2026–27, the value of barley and sorghum exports is forecast to remain below the value forecast for 2022–23, ranging from $2 billion to $2.5 billion for barley and from $290 million to $390 million for sorghum.
The Australian feed barley price is forecast to increase by 17% to $272 per tonne (US$199) in 2021–22, reflecting the forecast increase in world coarse grain prices (Figure 1.1). Australian barley prices are likely to remain below the world price because Australian producers are unable to access the higher-value Chinese market due to the imposition of anti-dumping and countervailing import tariffs. ABARES has assumed the import tariffs imposed by China will remain in place over the outlook period to 2026–27, therefore, Australian barley prices are not likely to equalise with other world export prices in the medium term.
The world indicator price for barley (fob Rouen, France) is forecast to increase by 19% to US$286 per tonne in 2021–22. World demand for barley is expected to outpace supply, reducing stocks and leading to higher prices. The world indicator price for corn (fob Gulf) is forecast to increase by 20% to US$261 per tonne in 2021–22. World corn production is forecast to increase to a record in 2021–22, however, stocks are likely to remain relatively flat due to strong world demand.
f ABARES forecast.
Sources: International Grains Council; Jumbuk AG; US Department of Agriculture
Grain prices are forecast to remain strong in 2022–23 due to strong world demand. The world barley and corn prices are forecast to fall 7% to US$266 and US$244 per tonne respectively, but remain high compared to average prices over the last 5 years. Supply chain disruptions, reducing both the availability of fertiliser and increasing transportation costs, would potentially result in world barley and corn prices averaging slightly higher than under the faster recovery pathway, at US$283 and US$256 per tonne, respectively.
Prices are expected to ease gradually (in real terms) over the projection period to 2026–27 due to increasing supply more than offsetting increasing world demand. Should heightened uncertainty and greater disruptions to agri-food markets continue beyond the next 18 months, world prices would likely remain more elevated.
Barley production is forecast to increase to 13.7 million tonnes in 2021–22, the highest national barley harvest on record. Favourable seasonal conditions across major growing regions boosted yield potential despite an estimated fall in area planted to below 4.4 million hectares, 5% below the 5-year average to 2020–21. Higher relative margins for other crops have provided an incentive to shift out of barley, in part because of the loss of the Chinese market and its impact on prices.Sorghum production is forecast to increase by 75% to 2.6 million tonnes in 2021–22, the third highest on record. Above average sorghum production reflects favourable seasonal conditions and a 22% increase in area planted.
Year-on-year changes in area over the outlook period will reflect grower constraints related to crop rotations, rainfall in time for planting and input costs. The area planted to barley is likely to fall in 2022–23 due to high input costs and rotation considerations. Over the outlook period to 2026–27, the area planted to barley is expected to remain below the 5-year average, ranging from 4.2 to 4.3 million hectares, subject to soil moisture variability and the impact of the loss of the Chinese market.
Another year of favourable growing conditions in 2022–23 will ensure that Australian barley and sorghum production remains at above-average levels. Barley and sorghum production in 2022–23 is likely to be at around 11 million tonnes and 1.7 million tonnes respectively, lower than in 2021–22, supported by stored soil moisture and assuming average (decile 4) rainfall. Over the remaining 4 years of the outlook period, projections for Australian barley and sorghum production assume that seasonal conditions allow yields to reach the levels that are achieved with below-average to average rainfall (deciles 2 to 4). Production outcomes for barley could range from 9.4 to 10.4 million tonnes during the outlook period (Figure 1.2). Production outcomes for sorghum could range from 1.2 to 1.6 million tonnes.
Production over the outlook period will depend heavily on annual seasonal conditions. Less favourable El Niño like seasonal conditions would lead to lower Australian barley and sorghum production in 2023–24 in the faster recovery scenario and in 2024–25 in the slower recovery scenario. However, lower production is unlikely to significantly alter the domestic price due to the significant recovery in domestic stocks following the past consecutive high-production years. Stocks are likely to be more than sufficient to meet domestic demand and maintain average export volumes during the lower production years of the outlook period.
f ABARES forecast. s ABARES estimate. z ABARES projection.
Source: ABARES; ABS
World corn production is forecast to reach record highs in 2021–22, increasing by 7% to 1.2 billion tonnes. Despite unfavourable conditions associated with the current La Niña event, corn production in Argentina and Brazil is on course to reach a record output of 54 million tonnes and 114 million tonnes respectively in 2021–22. Higher US corn production is also forecast for 2021–22, increasing by 7% to 384 million tonnes.
In contrast, world barley production is forecast to fall in 2021–22, leading to a decline in world barley stocks to historically low levels. World barley production is forecast to fall by 9% to 146 million tonnes in 2021–22. Production in the European Union and Russian Federation is forecast to fall following reduced plantings. Also, drought conditions have limited the yield potential of barley in Canada, leading to a 35% fall in production to 6.9 million tonnes.
Strong world prices and supportive seasonal conditions are likely to influence planting intentions, leading to area planted expanding in 2022–23. However, input costs and availability are also likely to play a part in determining planting decisions. Assuming average yields, world corn production is forecast to increase by 2% to more than 1.2 billion tonnes in 2022–23. World barley production is forecast to increase by 8% to 157 million tonnes in 2022–23, reflecting a rebound in Canadian production. This will lead to a recovery in world barley stocks.
El Niño conditions would likely result in higher yields in South America and some key cropping regions in the United States, leading to higher world coarse grain supplies and lower grain prices. This would occur in 2023–24 in the faster recovery scenario and in 2024–25 in the slower recovery scenario. Growth in world production is then likely to slow for the remainder of the outlook period. Yields are assumed to continue to trend upwards over the outlook period because of the adoption of better practices and continued closure of yield gaps in emerging production regions.
World corn consumption is forecast to rise by 3% to almost 1.2 billion tonnes in 2021–22 because of forecast record feed, food and industrial use. World barley consumption is forecast to ease in line with falling production yet remain high compared to previous years.
The Chinese pig industry’s efforts to contain African swine fever and rebuild the pig herd have driven growth in feed demand for coarse grains. Chinese feed demand for corn is expected to increase in 2021–22. As a result of higher domestic production, Chinese corn imports are forecast to fall by 12% yet remain high at 26 million tonnes, almost 3 times the 10-year average. This includes strong Chinese imports of US corn, with large purchases by China projected to continue in 2022 and for the remainder of the outlook period. US corn exports are expected to remain high in 2021–22 at around 62 million tonnes. Chinese feed demand for barley is expected to remain unchanged from 2020–21 and imports are forecast to remain high at 10.5 million tonnes.
Domestic demand for coarse grains in the United States is forecast to remain stable in 2021–22, especially for corn as animal feed and for food and industrial uses. The blending mandate in the United States is a key determinant of ethanol production sourced from corn. Plans to increase the blending mandate were recently delayed, however, the mandated rate is expected to increase in the next 5 years. The use of corn for ethanol production in the United States is expected to increase in response to new renewable energy targets introduced over the outlook period.
Over the medium-term to 2026–27, world economic recovery and increasing incomes are likely to drive strengthening demand for coarse grains, particularly in Asia. Growth in demand for biofuels is expected to continue as economies recover from the impact of COVID-19 related restrictions.
Summer bushfires signal concern for key cropping regions in Western Australia
Uncertainty exists about the potential effects of recent bushfires in Western Australia on the upcoming 2022–23 winter cropping season. Conditions that are significantly drier and hotter than average may delay planting of the 2022–23 winter crop, leading to lower plantings and reducing production in affected regions.
Russia-Ukraine geopolitical tensions
Geopolitical tensions between Russia and Ukraine are raising concerns about potential disruptions to crop production in Ukraine. Ukraine is a major producer of corn and barley, therefore, any disruptions to crop production could lead to a tightening of world coarse grain supplies. This would likely result in higher world grain prices and contribute to price volatility.
Alternative markets for Australian barley
Australian barley exports to China effectively ceased in response to Chinese tariffs imposed on Australian barley in May 2020. This has led to Australian barley exports trading below the world barley price. Given that Australian barley is competitively priced in world markets, this provides an opportunity for Australian exporters to open new markets and increase market share in existing markets. This is reflected by robust demand from the Middle East (particularly Saudi Arabia), Thailand, Japan and Vietnam (Figure 1.3).
Note: Reported in marketing years, 1 November to 31 October
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