Tariff trade trajectory from barley to barely

The head of CBH’s marketing and trading division says China’s proposal to slap hefty tariffs on Australian barley imports are a shock to industry, and revealed he has grave concerns barley exports to the economic powerhouse would end.

A joint statement issued by industry groups at the weekend revealed that China’s Ministry of Commerce was likely to impose hefty tariffs on Australia barley imports on or before May 19, in response to its investigation into dumping of Australian barley.

CBH marketing and trading general manager Jason Craig said the tariffs would make it impossible for Australia to compete in the lucrative Chinese market.

Australian barley exports to China average about $1 billion a year, reaching a drought-affected $600 million last year but $1.5 billion in 2018.

“The industry has been waiting for MOFCOM to make a determination or an announcement, so these tariffs are very high and it was unexpected for the industry,” Mr Craig said.

“Industry is very surprised at the level of the tariffs proposed. They are a lot higher than what we would have expected.

“For WA growers, and for CBH, it is clear that if these tariffs come into place, exports to China will potentially stop because we will be uncompetitive into the Chinese market.”

Mr Craig said the tariffs would make Australian barley “too uncompetitive” for buyers or importers, which would have to add the 73.6 per cent dumping margin and the 6.9 per cent countervailing duty margin to any tonne of Australian barley purchased.

The subsidy claims are understood to refer to Australia's fuel rebate and drought support measures, and together with the dumping tariff would effectively put an end to Australia's barley trade with China.

The tariffs would nearly double the cost of importing Australian barley into China, meaning a $300 tonne of barley delivered to China could cost Chinese customers an additional $200-$250.

Under World Trade Organisation rules, the tariffs could be place for five years before being reviewed by MOFCOM. CBH, which is Australia’s biggest grain marketer and trader, has about 1.4 million tonnes of barley sitting in its system — but some of that has been purchased by other traders.

“The tonnage in the CBH system is owned by multiple marketers, so we don’t know their positions,” Mr Craig said.

“CBH’s tonnages, some of that is sold and some is unsold. We will assess the market circumstances and conditions going forward, but certainly, the market will be lower.”

Mr Craig said last year’s drought-affected grain harvest would mean there was not a huge oversupply of grain in the Australian system this year.

However, he said Australia could end up with unsold barley when the new season crop was harvested later this year.

“You have to remember we have had a drought in Australia, so there are limited supplies in Australia remaining,” Mr Craig said.

“The impact of this is probably more for the new crop, rather than the old crop.

“Growers are planting barley and a large portion of that is unsold. Traditionally that would go to China.”

Mr Craig refuted some growers’ claims Australian traders, including CBH, had relied too heavily on China to sell barley.

He said it was important to remember China was the biggest barley market worldwide.

“CBH has developed relationships and built trade in a number of markets, including Japan and Vietnam, for malting barley,” Mr Craig said.

“Japan and Thailand also take feed barley, as well as other markets in the Middle East like Saudi Arabia or the United Arab Emirates.

“In addition to stable markets like Japan, we have to remember that China is the largest malting barley market worldwide, so this is an attractive market for Australia that we have been working with for more than 50 years.

“Some of them will take some of China’s share, but the Chinese market has been the significant buyer of Australian barley.”

Australia’s grains industry is working with the Government to mount the strongest possible case against the investigation.

Mr Craig said CBH would also write a separate response to the final determination, which was released to Australia late last week.

“CBH will be working with the Government and ourselves independently to write a response and we will be working hard to request the Chinese Government review this final determination,” he said.

“CBH will provide a response, it has been asked to provide one, and so we will do that in accordance with the WTO rules. CBH will be writing its own response.”

Mr Craig said it was too “too early” for CBH to assess whether the tariffs would have any impact on its network strategy or plans for CBH bins across WA.

China initiated an anti-dumping investigation into Australian barley exports in November 2018, alleging Australian farmers produced barley at a price lower than its “normal” level through 2014, 2015 and 2016, undermining local producers.

The World Trade Organisation definition of dumping is when exports are sold at a price lower than the exporting country's domestic market, and or lower than production costs which results in 'injury' to the importing country's domestic production.

The Australian grain industry has denied the allegations.