AUSTRALIAN barley farmers have moved on, big time. Facing massive Chinese tariffs and an urgent need to ship a bumper harvest, they're piling into one of the world's mega markets for the grain - Saudi Arabia.
For the first time in about five years, Australia has meaningfully broken into the Saudi market, beating usually fierce competition from other suppliers, and there are signs that sales will continue at least until the middle of the year, according to Andrew Whitelaw, an agricultural analyst at Thomas Elder Markets.
"We lost China," said Mr Whitelaw in Melbourne, but Saudi Arabia is shaping up to be Australia's biggest customer this season.
"If you look at the last three tenders in a row, we got the lion's share of most of that," he said. "In terms of volumes to Saudi Arabia, we're getting more than anyone else."
In tender results announced last week, Australia appears likely to provide the bulk of a purchase of 660,000 tons, pushing out traditional suppliers from the European Union and Black Sea. Australian trade data show the value of exports to Saudi Arabia far exceeded every other destination in December.
Saudi Arabia and China jostle for the position of top barley importer, with Saudi being ahead the past two years and China having an edge this year, according to data from the US Department of Agriculture. The kingdom uses most of the barley as feed for sheep, camels and goats, a tradition among Bedouin tribes.
The sales are a significant turnround for barley growers in Australia, who were hit last year by escalating political tensions with China, spurring Beijing to impose anti-dumping tariffs of over 80 per cent on the grain as a retaliatory measure.
The surge in global crop prices to the highest in more than six years has lifted Australian barley sales. China's been scooping up soybeans and grains to feed a recovering hog herd and rebuild stockpiles, pushing up world markets. That's made Australian barley competitive, opening up new destinations.
"There's only a finite amount of grains, so when China soaks up a lot of demand, it means that other countries will buy alternate products, for instance barley instead of corn," Mr Whitelaw said.
Australian farmers had a near-record harvest this season as rains supercharged crop yields. With expectations for next season also tipped to be favourable, the sales into new markets are welcome news.
Mexico bought its first ever shipment in January, while sales to Thailand and Vietnam have surged. There are nascent signs of interest from India after the government removed phytosanitary restrictions that have kept Australian barley locked out of the country for a decade, Mr Whitelaw said.
Still, risks remain in the long term. Saudi Arabia is set to phase out government tenders as it shifts towards private deals. That could spur a decrease of barley imports in favour of other grains. At the start of February, the Foreign Agricultural Service of the USDA forecast barley imports at 6.2 million tons in 2020-21, about 23 per cent below the official USDA's latest estimates. BLOOMBERG