October 3, 2007

 

High barley prices may stay on world demand

 

 

Barley farmers are possibly facing the "perfect storm'' of fundamentals driving world demand, an ABB Grain Ltd marketer says.

 

ABB Grain feed and malting barley marketing manager Lyndon Asser said a smaller-than-expected barley crop in Europe, a Ukrainian ban on grain exports, good Chinese malting barley demand and other factors had resulted in high barley prices which are likely to continue in the foreseeable future.

 

Malting barley has been trading at about US$450/tonne at port and US$420/tonne for feed grade.

 

He said though prices might fall at harvest, they were unlikely to fall below US$300/tonne.

 

Asser said some European farmers suffered drought this year, while others had their crops hit by rain at harvest.

 

Domestic production problems prompted the Ukraine -- the second largest exporter to Saudi Arabia -- to ban barley exports.

 

Asser said there is a serious demand coming from China and the Middle East.

 

The Canadian Wheat Board's abandoning of single-desk sales of barley out of Canada going away from orderly marketing and shipping in South Australia has led to uncertainty and price increases, he said.

 

He added these factors had been offset by Saudi Arabia increasing subsidies to its Bedouin tribesmen so they could afford to buy grain for their livestock at reasonable prices.

 

Saudi Arabia buys about six to seven million tonnes of feed barley each year -- or about half the world trade in barley.

 

The differential between malting and feed prices was likely to narrow in the near future, driven by the demand for energy from coarse grains, Asser points out.

 

Asser said the spread between feed and malting barley prices was also likely to decline as a result of cheaper container freight to the Chinese market.

 

He said container freight rates were as low as $US20/tonne, compared with $US70-$US80/tonne for bulk shipment, allowing smaller player and lower-quality product into the market.