2015 CBH AUSTRALIAN BARLEY UPDATE. CBH Group, August 2015 GIWA Spring Forum

Transcription

1 2015 CBH AUSTRALIAN BARLEY UPDATE CBH Group, August 2015 GIWA Spring Forum

2 AUSTRALIAN BULK GRAIN EXPORTS YTD 2014/2015

3 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16f Thousands WESTERN AUSTRALIAN BARLEY PRODUCTION August YEAR AUSTRALIAN BARLEY PRODUCTION AVERAGE = 2.36mmt 10 YEAR AUSTRALIAN BARLEY PRODUCTION AVERAGE = 2.38mmt 5 YEAR AUSTRALIAN BARLEY PRODUCTION AVERAGE = 2.42mmt

4 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16f Thousands AUSTRALIAN BARLEY PRODUCTION August WA SA Vic NSW Qld 0 14 YEAR AUSTRALIAN BARLEY PRODUCTION AVERAGE = 7.58mmt 10 YEAR AUSTRALIAN BARLEY PRODUCTION AVERAGE = 7.62mmt 5 YEAR AUSTRALIAN BARLEY PRODUCTION AVERAGE = 8.15mmt

5 PRODUCTION Key Points Barley plantings are up by approximately 5-10% year on year WA production estimate is around 3 MMT based on a planting estimate of 1.25 million hectares. Australian production estimate is around 8.7 MMT, potential for further upside with a soft finish Lingering threat of El Nino which could impact NSW and VIC finish Global barley production forecast is 140 MMT, strong production in northern hemisphere again this year with the exception of Canada. EU 59 MMT Russia 17.5 MMT Ukraine 7.5 MMT Canada sub 7MMT

6 WORLD BARLEY ENDING STOCKS AND S/U RATIO World barley outlook is balanced 2015/16 ending stocks at 21.4 MMT with S/U ratio of 15.08% Expect global consumption to be lowered in September which will increase S/U ratio to around 17%

7 CHINESE SITUATION Chinese barley imports (Jan Jun) currently at MMT versus MMT to the same time last year, an increase of 127% Chinese Sorghum imports (Jan Jun) currently at MMT versus MMT to the same time last year, an increase of 121% Compound feed millers in China have been importing corn and corn substitutes as an arb against high domestic corn prices that are heavily subsidised by the Chinese government. These imports have seen Chinese corn stocks inflate to 120 MMT with a bumper crop about to be harvested - production forecast is 225 MMT

8 CHINA Chinese Barley Imports

9 CHINA CHANGING POLICY General consensus is that the Chinese government is going to do something to curb imports of feed grains; 1. Cut the state imposed floor price of Corn to make domestic their corn more competitive against cheaper imports of corn and corn substitutes (Barley, Sorghum and DDG s) 2. Restrict imports of corn and corn substitutes through import tariffs, tighter control of import permits or other restrictions.

10 WA FEED BARLEY PRICE FIS CBH V Best Bid 2015/16 feed barley price peaked on the 8 th July at $296 FIS which was approx. a USD240 FOB Today top bid is $255 FIS which is a USD202 FOB equivalent

11 MARKETS Feed Demand The flow on effect of the Chinese policy change is that customers have pulled back as they seek to understand the processes involved in obtaining an import permit. This, coupled with the increased production outlook for Australia has seen values work lower over the last couple of weeks. Australian barley exports stand at 4.1 MMT, 90% of which has been exported to China for the 2014/15 season due to strong demand and willingness to pay a premium. The policy change may mean we will need to price back into traditional markets General feel is that they will buy barley again, but at what price?

12 GLOBAL BARLEY OUTLOOK Outlook 2015/2016 Global malting barley production will remain tight in 2015/16 due to the following reasons Global Barley S/U ratio forecast to be at lowest levels in 10 years this will be supportive of barley complex as a whole. Hot and dry finish in Europe having detrimental impact on the spring two row crop (50% of their overall barley crop). Canadian Carry in is very low and growing conditions below average new crop production estimate steady/declining. Continued risk of El Nino on the East Coast of Australia. WA crop delayed and rainfall is below average. Expect feed to pick up after December as Black Sea will be close to finished. Russian growers not sellers as Ruble volatility sees them keep grain on farm as inflation hedge (similar to Argentine soybean farmers).

13 MALTING BARLEY Outlook Current demand is weak for both malt and feed barley Reports that Chinese beer production has dropped 2.26% for first six months of 2015 which is first time in last years in China While we expect malt barley demand to be relatively stable Chinese maltsters are in no rush to buy Given current production and demand outlook malt premiums are expected to remain steady. Likely to see continued downward pressure on the feed grain complex barley will not be immune to this In general we expect barley prices will continue to trend lower and as feed prices drop they will drag malt prices lower