Australian fertilizers shrug off China barley tariffs

China has introduced import tariffs exceeding 80pc on Australian barley, in a move that is expected to have little impact on fertilizer demand but will likely prompt some farmers to switch from barley to other crops over the longer term.

Barley, one of Australia's leading agricultural exports, will be subject to a 73.6pc anti-dumping tariff in China with effect from 19 May. This is in addition to a 6.9pc anti-subsidy tariff, following an investigation that began in November 2018.

Australia exported around 8mn t of barley from July 2017 to June 2018, with approximately 5.7mn t or 71pc going to China. Production totalled around 9.3mn t over the period, according to the Australian Bureau of Agricultural and Resource Economics and Sciences data.

China's decision could result in a loss of up to A$200mn ($130mn) for farm incomes in Western Australia (WA) this year, said WA government minister Alannah MacTiernan. Australia's grain trade industry estimated the tariffs could cost the country's grain sector and related economies at least A$500mn/yr.

Major importers and distributors of fertilizers forecast limited impact for this sector in the short term, despite the potential loss of China as an outlet market for barley. A good portion of the barley crop has already been sown for this year, so total planted areas will not be significantly impacted. Farmers will likely continue to apply fertilizers to maximise yields and potential returns, so the tariffs are not expected to prompt a direct fall in fertilizer demand this year.

Australian farmers will likely reduce barley acreage and return to other crops like wheat and canola where rotations allow, if tariffs remain in place for the longer term. Some malting barley may also be switched to feed varieties, but total planted areas and fertilizer demand should not be notably affected, fertilizer sellers predict.

Some fertilizer sellers expect barley acreage in WA to decline by around 10pc over the longer term as farmers switch to wheat, but no major drop in fertilizer demand is anticipated. Barley currently accounts for around 20pc of plantings in WA, the largest state for barley production.

Exporters are now expected to increasingly compete in other markets like Saudi Arabia as the tariff threatens China's position as the main outlet for Australian barley.

By Carl Roache