World: Barley still remains a niche crop in a much larger agricultural world - analysts
Events over the past few weeks have sparked a considerable wheat market price rally around the world, and in the process has provided a valuable reminder to the market positioning which barley holds in the larger agricultural landscape, RMI Analytics said in their latest report on June 7.
In this particular case, negative crop production news, through a combination of drought and frost events in Russia, has taken centre stage. This is occurring at the same time that world barley production is rebounding after a lower 2023 crop result. So, despite rather good fundamentals in the barley space, prices have been pulled higher by ‘external influences’, and providing once again an example of barley being a niche crop in a much larger agricultural world.
First, let’s take a look into what is happening in Russia. After two record wheat crops in 2022 and 2023, the crop 2024 issues in Russia are forecast to result in a production decrease in wheat by ~10% from the initial estimate of 91-92M tons based on several crop estimates. The crop issues in Russia are joined by dryness concerns in parts of the USA, and Australia. This market ‘shock’ sent wheat prices sharply higher and barley prices along for the ride.
Barley’s positioning as a niche crop reminds us that barley represents ~5% of total grains. Production is led by coarse grains (mainly corn/maize plus other cereals), and followed by wheat and rice.
On the surface, a 10 mln tonnes reduction in Russian wheat production, when total wheat production approaches 800 mln, may seem to have sparked an over-reaction in wheat prices. However, the market response to this news has exposed the sensitivities of grain markets to ‘surprises’ and barley prices are not insulated from such dramatic price moves. A need for 10 mln tonnes of wheat to be replaced in world markets by other origins, is significant and is the reason for the price action that has taken place. Eventually, this news from Russia is being absorbed in the market and a correction is already underway.
This leaves the barley market at the mercy of these wider forces, like wheat, and a valuable reminder of barley’s positioning in the world of agriculture - as a niche crop where volatility never lies far away.
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