After a 12-month wait, news was forthcoming last month on China's investigation of alleged dumping of Australian barley in their market.
In no surprise, China announced the probe would continue for another six months as is permissible under World Trade Organisation protocols.
While an announcement the investigation was being abandoned would have lifted our export zone pricing, it will take more than the probe being lifted to return Australia's barley exports to China to the buoyant pre-2018 volumes.
The first and most obvious hurdle is for Australia to return to average grain production. After three years of below to well-below production, we will need at least an average harvest volume in 2020 to trigger a significant uplift in feed barley exports to China. This will be to return Australian barley pricing to competitive international levels, something that will be hand-braked as parts of the country undergo stock rebuilding.
That price competitiveness will be all the harder to achieve over the year ahead as global production is forecast to rise year-on-year. Increased planting and better seasonal conditions mean the USDA has barley production pegged at almost 156 million tonnes for 2019-20 - up 12 per cent year-on-year - and stocks to grow by 20 per cent. Increased production from lower cost producers Russia and Ukraine will add to downward price pressure.
But competitiveness is about access too, and China has been actively expanding its barley supply options, including access permits granted for Kazakh and Russian barley and increased European imports.
More significantly though, Chinese domestic dynamics are contributing to the bearish outlook for Australian barley exports. Chinese growth is slowing and expected to continue to slow over coming years, subdued further by US-China trade war distortions. Comparatively lower Chinese corn prices since the removal of Chinese corn production support and lower feed demand due to African Swine Fever also weigh on the outlook for Australian barley.
Lower corn stocks in China may see a return to higher corn prices into the future, and the post-ASF herd rebuild and consolidation of China's protein production base will favour areas closer to ports that can receive Australian feed barley. Together, these factors will provide a shift in the relative pricing of corn and imported Australian barley.
For the short-term though, we can expect bearish barley export sentiment over the next year even if no dumping penalties are put in by the final deadline in May 2020.