Barley 2023/24: challenges and opportunities for a high-yielding season

Barley 2023/24: challenges and opportunities for a high-yielding season

A phenomenal increase in average yields would partly compensate for the sharp drop in sown area, but total supply would still be tight in the face of strong demand. International dynamics could bring better prices for Argentine grain.

The coming season will bring a significant recovery in yields, although the drop in sown area will keep the level of supply almost unchanged from year to year. Even so, the 2023/24 cycle will bring opportunities for Argentine grain, in the face of a meagre world harvest.

As a consequence of the fierce drought, local production in 2022/23 was 4.4 million tonnes. Despite having the second largest area sown to barley in history, the average yield was the lowest in a decade, offsetting its effect.

Forecasts for the 2023/24 cycle, meanwhile, point to a 22% drop in area sown, but this would be offset by a substantial increase in the average yield per hectare, which would rise from 28 qq/ha to 38 qq/ha between years. Production would remain almost unchanged from last year’s levels, despite the significant reduction in the area sown.

Demand, on the other hand, is expected to remain at the high levels observed over the last three cycles, with malting plants being the main source of domestic consumption. Malting barley milling is expected to increase by 7%, reaching a record of 1.15 million tonnes. Meanwhile, exports are projected at 3 million tonnes, 68% of the total supply. A demand that sustains its intensity in conjunction with a declining total supply would leave an adjusted ending stock of 0.6 million tonnes of barley, with a stock/consumption ratio of 13%, the lowest in five seasons.

Advances in the commercialization of the 2023/24 barley season

The dynamics of barley in the domestic market has been affected by the same logic that “paralyzed” new merchandise commitments for a large part of the crops.

Considering the average of the last six seasons, at this stage of the year, 1.14 million tonnes of barley corresponding to the coming cycle should already have been commercialized in the local market. This would be equivalent to 24% of the season. However, domestic commercialization of 2023/24 barley is currently 70% behind schedule, with only 345,000 tonnes having been traded, of which 60% corresponds to feed barley. The production estimates only about 7% of the future harvest has been harvested.

In line with this phenomenal slowdown in the pace of trade, foreign sales registrations are also lagging significantly behind. So far, 329,100 tonnes of the new season have been registered, well below the 1.12 million tonnes that are declared on average at this stage of the year. If exports are projected at 3 million tonnes, only 11% of the total tonnes to be exported would have been registered, far behind the 32% that should have been registered by this time of the year.

As a counterpart to the above, the atypical situation is that, the volume sold and the estimated use as seed, 4.68 million tonnes of barley for the 2023/24 remain to be committed. Thus, in the face of a tight international context in terms of production levels, the Argentine grain could find an opportunity to place its production in the event of an upward trend in prices.

International outlook: Tight world production would leave the lowest stock-to-consumption ratio in a century

According to the latest estimates by the USDA, 142 million tonnes of barley are projected for the coming season worldwide, 6% less than the previous season and 7 million tonnes below the average of the last five seasons. Currently, the production projections and the initial stocks expected to pass through for the new cycle, make up a global supply of 189 million tonnes, an adjusted volume in relation to what has been seen over the last few years.

Globally, 90% of barley exports are accounted for by the six main exporters. Among them, the European Union, Australia, Russia and Ukraine account for 72% of the international market. Meanwhile, the European Union is expected to have the smallest barley crop in twelve years, according to the latest GCR report. Europeans account for 35% of world production and top the ranking of exporters. Projections indicate a 7% drop in exportable volume compared to last year. However, China and Iran, two of the world’s main importers, are expected to maintain their demand for feed, even with small year-on-year increases. This would help to maintain the market and put some pressure on prices. The Asian giant is the main buyer market for Argentine barley, accounting for 35% of exports corresponding to the barley complex and 52% of feed barley exports.

Barley prices on FOB markets have been on downward trend since the explosion of uncertainty generated by the conflict between Ukraine and Russia at the beginning of 2022. However, in view of the production projections for the coming season, a deceleration of that trend can be seen and a potential floor to the fall in quotations that could be positioned closer to 250 USD/tn than 200 USD/tn.


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