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Australia Australian Barley farmers forced to sell grain elsewhere as China imposes new trade tariffs

22:52  18 may  2020
22:52  18 may  2020 Source:   abc.net.au

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a man smiling for the camera: Esperance farmer Mic Fels said the tariffs have now priced him and other farmers out of the Chinese market. (Supplied: Mic Fels) © Provided by ABC NEWS Esperance farmer Mic Fels said the tariffs have now priced him and other farmers out of the Chinese market. (Supplied: Mic Fels) Barley farmers like Mic Fels are bracing for a major financial hit as China's new trade tariffs effectively kill off their premium market and force them to try and sell their grain to less lucrative and more competitive global markets.

"It's a hugely disappointing outcome and we had hoped for something less damaging for the industry," said Mr Fels, from Esperance, on Western Australia's south coast.

In anticipation of China's announcement of an 80 per cent tariff on Australian barley imports, some farmers had last week already stopped sowing barley in their fields knowing their largest export market was in jeopardy.

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Australia's barley exports to China were worth $600 million in 2019, falling from $1.5 billion in 2018 because of drought and an effort to diversify into more markets.

Western Australian farmers will feel the brunt of the tariffs; about 88 per cent of barley exports to China come from WA.

Mr Fels knows the tariffs have now priced him and other farmers out of the Chinese market, which had been prepared to pay a premium for high-quality Australian malted and feedlot barley.

"A pretty big hit to our profit margin this year on barley," he said.

"It may even wipe the profit margin away depending how bad it gets."

Mr Fels, who is also the WAFarmers grains president, said it could put a lot of farmers into the red this season.

"People have made their planting decisions now," he said.

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"Most of the barley in the State has been planted, literally in the last two to three weeks. You can't pull it out of the ground now it's in. We're sort of committed on barley.

"But most farmers have resilient enough businesses that you can absorb that once, but it will mean that they change out of barley the following year so it doesn't happen again."

Further west in the township of Amelup, near the Stirling Range National Park, Tim O'Meehan had sowed about half his barley last week and then stopped as tensions with China escalated.

"I won't seed 90 hectares, and there's probably another 150 that I'm contemplating whether it goes into wheat or barley," he said.

The price of barley fell sharply as news of proposed tariffs emerged and Mr O'Meehan is already resigned to making less money this year.

"You just sell it somewhere else, you take a hit with the money," he said.

"Fill the void that way. But there's no guarantee there. China's been a huge buyer of our barley."

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Diversifying markets to lessen reliance

Farmers are looking to diversify away from China to other markets or to expand existing markets, even if it means accepting lower prices and fighting it out in more competitive markets.

Mr Fels said Saudi Arabia had been the major buyer of Australian feedlot barley for cattle eight-to-ten years ago, but China had since started buying it at a higher price.

He said Australian farmers would now be competing with growers from around the Black Sea region for access to the Saudi market.

"Even though we have our premium quality product, if the premium buyer exits the market vis-a-vis a tariff, then we're sort of competing with low grade, low-quality grain from other parts of the world and getting priced accordingly," he said.

Australia exports about 730,000 tonnes of malted barley each year, mainly to countries in Asia for brewing beer.

Mr Fels said increasing exports to existing buyers in South Korea, Japan and Vietnam was an option.

With a free trade deal due to come into force with Indonesia in July, he said that would include a deal to export 500,000 to 1 million tonnes of feedlot barley.

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"We do have other buyers for our grain, we're not going to be cast out into the street, that's for sure," Mr Fels said.

Concerns of more tariffs in other sectors

The tariffs have farmers and other producers worried the trade dispute could expand to other sectors.

Amelup farmer Tim O'Meehan, who also relies on sheep for about a third of his business, thought it may already have started, with wool prices falling in the last six weeks.

Most of WA's wool is processed in China.

"We're sadly so reliant on China at the moment, barley, wool, beef, its a big worry," he said.

China's ambassador to Australia Cheng Jingye has already threatened a consumer boycott of Australian beef and wine.

About a quarter of all wine made in Australia is exported to China, creating a market worth of about $1 billion a year.

"There's no question it would require a big pivot and be something that probably would be best not have to happen," Larry Jorgensen, chief executive of Wines of Western Australia, said at the prospect of a boycott or tariffs.

Even though WA wine growers are not as exposed to the Chinese market as their eastern states counterparts, they have also been looking to diversify their markets.

"That's the pivot really, is how you change your allocation of resources that could grow again. The UK for instance, the dynamics there and the impact that Brexit has had," Mr Jorgensen said.

He said the industry also had its sights set on growing exports to South Korea, Japan and the South East Asian markets as well.

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Australia won't be swayed by China threats, Dutton says .
Home Affairs minister Peter Dutton says Australia will not be intimidated by China's tariff threats amid reports coal exporters could face tougher selling restrictions. New inspection regulations for iron ore imports in China and a decision to slap 80 per cent tariffs on Australian barley imports has already seen the trade war with Beijing escalate.Some beef exports from Australian farms have also been banned."We have beliefs and values - and we're going to stand by those," Mr Dutton told Today."We don't believe there is a reasonable case in relation to the taxes, tariffs imposed by China.

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