After the resolution of a dispute over tariffs that wiped away about $1 billion a year in exports, it is anticipated that the trade in Australian barley will shift back to China from the rapidly expanding market in Saudi Arabia.
After having a disagreement with the Morrison administration in Australia, China imposed tariffs of 80.5% on the grain in 2020, which forced Australian growers to seek out new markets.
At its height, the Chinese market imported about 70 per cent of Australia’s barley. However, beginning in the year 2020, a significant portion of that grain was shipped to Saudi Arabia. This was a change that was welcomed by farm activists and the Albanian government, which was eager to reduce its dependency on China.
But as the relationship between China and Australia continues to thaw, the chairman of GrainGrowers, Brett Hoskings, told Guardian Australia that it would be difficult to resist sliding back into old habits, given the higher prices paid by China for Australian barley. Hoskings was commenting on the situation as the connection between China and Australia continues to thaw.
“When you have one market that is closer geographically, and they’re actually paying a premium and valuing the product that you produce, it’s very tempting to sell that market as much of the grain as you can possibly get,” he said. “The reality is that when you have one market like that, it’s very tempting to sell that market as much of the grain as you can possibly get.”
According to Hoskings, this indicates that Saudi barley markets will “take a bit of a hit” as a result of the restoration of barley trading to Chinese ports.
According to information by Australian Bureau of Agricultural as well as Resource Economics & Sciences, the value of barley headed for Saudi Arabia increased from practically zero in 2019 to 43.5% of the export market in 2021, whilst the value of barley destined for China decreased from 51% of exports to only 0.1% during the same time period.
In addition, barley imports into Vietnam, the Philippines, Kuwait, and the United Arab Emirates also climbed dramatically.
After being accused of “grain dumping” in the midst of a diplomatic dispute, the Chinese government decided to implement the tariff. Instead, it began purchasing grain from the Ukraine and France.
“It was a big shock to the system when we lost China – we had placed nearly two-thirds of our grain there, but that doesn’t mean we won’t repeat that again,” Hoskings said. “We had placed nearly two-thirds of our grain there.”
Even if the majority of barley exports were rerouted back to China, Hoskings predicted that commercial partnerships already established in the Middle East would continue to expand and develop.
He stated, “We tend to deal with people who are simple to deal with, and I think for that reason, you will continue to see the Gulf market play a part.” “We tend to deal with people who are simple to deal with.”
The Kingdom of Saudi Arabia has long relied on imports from Russia and Ukraine to meet its demand for barley. As a result, Saudi Arabia is the largest barley importer in the world.
During a webinar hosted by Austrade in 2022, the deputy governor of the Saudi Grains Organisation, Dr Mohammad Al Amri, stated that it was expected that Australian barley would become the country’s primary supply of barley in the near future.
According to Al Amri, the recent privatization of the local grain business and the implementation of new regulations limiting the amount of water that may be used for agricultural purposes have resulted in an increased demand for grain imports into the kingdom.
Tony Mahar, CEO of National Farmers Federation, expressed his satisfaction with the removal of duties on barley imported from China but emphasized that the organization will continue to advocate for the diversification of the agricultural sector.
In a statement, he lauded the action taken by the government of Australia to deal with the crisis and lauded the resiliency of Australia’s commercial partnerships in other parts of the world.
Penny Wong, Australia’s Minister of Foreign Affairs, made a forecast back in April that the country will not revert to the level of economic dependence on China that it had 15 years earlier.
“And the government will continue to encourage that because we want to make sure that we have a diversified network of export markets.”