China’s premium for Ukrainian barley: will it continue in the fall?

Ukrainian farmers contracted 120 thousand tons of barley for export to China in July. It is expected that 30-40% of Ukraine’s total grain exports will go to this country. So far, more than 1.5 million tons of barley have been harvested, and the harvest forecast is 5-6 million tons. This was discussed during the analytical briefing of the PUSK cooperative, created within the VAR.

“The global barley market is driven by the EU, but Ukraine faces strong competition from Romanian grain. When buyers such as Cyprus and Italy enter the market, French and Romanian barley is mainly exported there. According to forecasts, this year’s barley harvest in the EU will add 11 million tons. The main buyers of barley on the world market are China and Saudi Arabia, which buy 50-60% of the total volume,” analysts explain. It is expected that July will be a weak month for exports, and prices may not rise as supply increases due to the intensification of the harvesting campaign. Currently, only about 20% of the Ukrainian harvest has been harvested, and supply will grow as the season has not yet started in full force.

“Currently, the notional prices in Ukrainian seaports are $154-157 per ton, while the “Chinese quality” of barley, i.e. grain certified for sale to China, is estimated at $162 per ton. Seasonal models show a downward trend in prices. There is a risk of prices falling to $140-150 per tonne under the pressure of harvesting, but there is a possibility of returning to the level of $165 per tonne in the fall in Odesa ports,” analysts believe.

There is also a risk of losing the premium for barley certification for trade with China.

“Chinese quality” barley is traded at a premium of $5-7 per ton. There are already contracts for Ukrainian barley for July-August, but no further contracts have been signed. The question remains whether Chinese buyers will return in the fall. If China does not come to the market with demand for barley in early August, the premium may disappear for those who have certified their products for the Chinese market,” – analysts summarize.