Latin America bolsters Australia’s malting barley premium

Solid demand from Latin American countries for Australian malting barley is helping to widen its premium to feed barley, according to Australian Export Grains Innovation Centre markets manager Mary Raynes.

Speaking mostly at the July 29 Grain Industry Association of Western Australia’s annual barley forum, Ms Raynes said the Latin American market had emerged after China imposed its tariffs in 2020, and was significant now from a value and volume perspective.

Ms Raynes said Latin American markets, including Mexico, have grown to a substantial level.

“They’re our major malting markets outside of Australia and China,” Ms Raynes said.

“Without those…malting markets, the spread between feed and malting potentially would be tighter.”

Mexico imports close to 440,000 tonnes of malting barley per annum, and for the second consecutive year, it is importing 80 percent of that total from Australia.

Mexico’s major brewers are Heineken and ABI, which were previously obliged by the Mexican Government to consume a proportion of Mexican malting barley based on carbon and sustainability requirements.

Ms Raynes said when compared with Mexico’s own barley, the malting traits of Australian barley make it capable of satisfying those requirements.

“Mexico, Ecuador and Peru have become valued customers of Australia and are only buying malting barley; they aren’t buying fair average quality or feed barley, they are only buying malting only.”

“They’re buying hatches of Spartacus and/or hatches of Maximus.”

“It might be considered a small market against China, but it is a high-value market, and a stable market, importing 500,000t of malting barley from Australia.”

Speaking from the floor, CBH barley trading manager Drew Robertson said Europe’s quality issues with their spring and winter malting barley made it less competitive into Latin America at present.

“The ones we’re going to have to watch are Canada and Argentina in the back end of this year (to) see how their malting-barley quality and price competitiveness goes,” Mr Robertson said.

Forum host, GIWA Barley Council chair and InterGrain senior barley breeder David Moody provided an insight into the appeal of Australian malting barley to export customers.

“The growing environment in Australia, where you’re producing lower-moisture grain that’s harvested during drying conditions, gives the grain an inherent advantage that swamps genetic differences,” Mr Moody said.

“When the maltsters are buying grain out of Europe, it’s grain that’s higher moisture, so let’s say it’s 11pc instead of 9pc; that’s 2pc extra malt yield you get out of Australia, easy money for a maltster…and our drying conditions favour rapid germination, whereas if you’ve produced grain under cool, damp conditions, it’s sluggish to germinate.

“The feedback we were getting from China was they were saving 10 to 15 hours in the malting process because of the grain that they were getting.”

Mr Moody said the other bonus Australian malting barley has is “much less field fungi (and) fusarium contamination” than European product.

Ms Raynes said the Central and Latin American malting and brewing markets are wanting origin diversity, and were taking it upon themselves to advocate for Australian malting barley as cost-effective and sustainable.

“The leading global brewing companies were fast-tracking the internal accreditation of our Australian barley varieties because they perform better than the varieties they were sourcing locally and from Argentina.”

“Currently Australia is not exporting any malting barley  into Colombia because there’s that 15pc tariff, and we don’t have market access to Brazil.”

Graph 1: Australian barley exports by destination. Source: ABARES

Ms Raynes said there is local commercial support within South America to get Australian barley to Colombian and Brazilian brewers.

“If we did get access…into Brazil and Colombia, and maintain access into Mexico, Ecuador, and Peru, that’s a 1.5-million-tonne malting barley market; this would be significant for the Australia malting barley sector, as these countries are only buying malting barley.”

“It’s fair to say that the Australian barley varieties are now being accredited by these global brewing companies in….Latin America, Africa, Asia and Australia, so…that’s a significant footprint Australia barley has in global brewing and malting.”

Australia exports modest amounts of malting and feed barley to a number of Asian markets including Japan, Vietnam, and The Philippines, but China is the big one.

China long-term is estimated to import 11Mt of barley per annum, but is forecast to import 14.5Mt in 2023-24, equating to 46pc of global trade.

Graph 2: The past decade has seen Saudi Arabian barley imports shrink, and China’s grow. Source: AEGIC

Now that the tariff period from May 2020 to August 2023 has ended, Australian barley has regained the lion’s share of China business, with 5.4Mt shipped since the first vessel arrived in October.

“We’re actually supplying 80pc of their market,” Ms Raynes said, adding that Australia’s significant freight advantage over European and Black Sea barley has further contributed to the appeal of Australia as an origin.

As indicated by Australian Bureau of Statistics export data, much of the volume to China has been FAQ with malting characteristics, but without varietal purity, and feed.

Ms Raynes was part of a recent AEGIC-led delegation to China supported by the National Foundation of Australia-China Relations.

Delegation events were attended by representatives from numerous organisations, including the five companies which jointly produce around 90pc of China’s beer, as well as China’s major maltsters, Supertime and Dalian Xingze.

Ms Raynes said the latest from China’s brewing industry says the nation’s beer consumption has dropped from 500,000M hectolitres in 2013 to 350,000Mhl in 2023, a 30pc drop in 10 years, but more premium beers with a higher malting content are being made, and China is also exporting malt.

“China’s beer consumption is decreasing but their malt markets remain strong; their malt exports are still competitive against our malt exports.”

Behind wheat, barley is Australia’s second-biggest winter crop, and Australia’s barley area has grown from around 3.7M hectares in 2010-11 to a peak of 5.5Mha in 2020-21, before settling at its current size.

“We’ve now stabilised barley planting between 4.1Mha and 4.4Mha.”

From 2020-21 to 2022-23, Australia produced its only crops of more than 14Mt, and the current crop is forecast by ABARES to produce 11.5Mt.

Australia’s domestic market consumes around 1.2Mt of malting barley and, depending on the season, 4Mt of feed, or FAQ, annually; its surplus makes it the world’s biggest barley exporter, supplying around one-fifth of the 28-30Mt traded globally.

WA is Australia’s biggest producer and exporter, and harvested around 3.8Mt in 2023-24.

As well as delivering desirable malting characteristics, Mr Raynes said Australia’s five barley-breeding programs have also delivered varieties that have tracked at around 14pc above wheat yields for the past 10 years.

“It’s a bit of kudos to the barley breeders and the industry for inserting all that technical innovation, for providing varieties that have a wide…agronomic adaptation fit to the Australian grains industry.”

Speaking to the grower-heavy GIWA audience, Ms Raynes spoke about the value of barley in the national cropping rotation.

“You know that barley is a low-input crop and has some flexibility in planting early or late…so it’s pretty important that we maintain our market diversity.”

Tags: markets, Mexico, Latin American, Australia, feed barley, malting barley, demand, premium