With little in the way of futures markets, barley is often the poor cousin when it comes to grain and oilseed market commentary. While barley does tend to follow wheat’s trajectory pretty closely, we can find buy and sell signals by comparing it to wheat and corn markets.
Considering
Australia is expected to produce over 12 million tonnes of barley this year, it
seems strange that there isn’t more focus on price. The feed barley market
tends to follow wheat, and that’s what we’ll look at. Malting barley markets
are much harder to analyse, as it’s hard to know how much there will be until
harvest.
Figure 1
shows barley prices on both sides of the country, along with ASW at Geelong.
The trends across all three prices are closely related, even more so since the
Chinese tariffs on barley were lifted. The downward trend we’ve seen in all
wheat markets since May has been reflected in barley, although it wasn’t quite
as pronounced. The recent uptick was also stronger in wheat than it has been in
barley.
We can see
in Figure 2 that barley at Geelong briefly saw parity with ASW, for the first
time since 2019. Even now barley is less
than $20 behind wheat. Historically the
difference in energy value for livestock feed has barley averaged a $40
discount to wheat, so it currently looks like reasonable selling.
In global
markets, barley competes with other feed grains for markets. Corn is the
world’s largest feed grain and tends to drive world feed grain markets. Barley for
the most part can only get to a large premium for corn when there is a local
shortage, like in 2018-19, when feed demand drove local barley to a $200
premium over corn.
Geelong
barley is currently sitting at a $50 premium to corn, which is roughly where it
has been since the Chinese tariffs were lifted.
Harvest pressure could see the barley premium to corn weaken, but it
should recover post-harvest.
What does it mean?
Compared to local wheat, barley is currently priced well. Compared to US corn, barley is priced around average. In a local sense, feed barley could weaken with harvest pressure, and move to a $40 discount to wheat. Those looking to sell barley off the header for cash flow could find some security in locking in some forward contracts.
Key Points
- Barley prices have been following wheat but are currently priced well compared to ASW.
- Corn prices drive global feed markets, but barley is trading at a strong premium.
- Forward pricing for barley looks relatively attractive for harvest selling.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: Refinitiv, ABARES, Mecardo
