Local supply and demand factors were the main drivers of price during the second half of the 2021 calendar year. Barley prices were relatively stable, with some downward pressure applied during harvest and from competition from downgraded wheat for stockfeed. The wheat/barley price spread between Port Kembla F1 and ASW increased by approximately $31/tonne on average between July and December 2021 when compared to the previous six months ²⁴⁵ and was close to the top of the historical range. Continued strong global demand for feedgrains did lessen the downside risk but provided little incentive to hold on to barley stocks given the looming bumper new crop harvest. In response to the Russian invasion of Ukraine in late February 2022, global feed grain prices began rising, peaking in mid-March 2022 and narrowed barleys discount to wheat and sorghum. A softening Australian dollar supplied additional upward pressure however, the rise was tempered by the large domestic supply and export constraints which meant that Australian growers were not able to gain the full benefit of the global feed grain deficit and the associated price rise in international markets with local prices sheltered somewhat from the volatility of global markets. ²⁰⁶ With the majority of barley exports from Russia and Ukraine going into feed grain markets, the rise in global feed barley prices was much more dramatic than malting barley prices. Malting barley is usually priced at a premium to feed barley however, the pressures on feed barley stocks meant that global feed barley prices rose much more dramatically than malting barley prices and narrowed the global malting-feed spread for most of the latter half of 2021-22. ¹⁶⁸ This scenario was mirrored domestically and, given that the majority of the barley grown in NSW is largely feed barley, this change to the barley market price structure was advantageous for NSW growers.

Australian barley prices largely remained at a discount to international benchmarks. Thanks to the two successive bumper crops and the lack of Chinese demand, Australian export barley prices were overly competitive when compared to other global origins. Australian barley was priced reasonably competitively until the new 2021-22 European and Black Sea crops became available. Whilst prices generally followed a very similar trend, monthly average French barley prices outpaced Australian pricessince February 2022. ¹⁹¹ While Australia has the logistical advantage when it comes to freight costs to China and other key destinations such as Indonesia, the freight costs to Middle Eastern buyers favour our key competitors. This, combined with the need to shift large amounts of grain, forced Australian barley to run at a heavy discount to remain competitive. ^{188 189}

Domestically, whilst export demand was strong, Australia’s ability to meet this increased demand was hampered by supply chain issues. Two consecutive bumper crops tested domestic and export storage capacities and created logistical challenges getting grain to port on trucks and trains and ships to market in a timely manner. In November 2021, Graincorp estimated that the exportable surplus for NSW barley was +1.5mmt5, and with different grains competing to secure export opportunities, the export logistics were constrained. Globally, demand was driven by geopolitical volatility, poor production forecasts in key regions, and a low global balance sheet. Global stocks at the end of 2020-21 were estimated at 20.8 million tonnes ²⁵⁶ due to drought ravaged crops in Canada, the U.S and Turkey, and increases in corn acreage in the U.S at the expense of barley, which pushed total 2021 production in the U.S to its lowest level in a century. ^{179 187} The USDA estimated global barley ending stocks at 17.6 million tonnes at the end of 2021-22, the lowest in 38 years. ²⁵⁶ The outbreak of war between Russia and the Ukraine only added to the pressures on global barley stocks and trade. Russia and the Ukraine are among the largest global producers and exporters of feed barley, accounting for approximately 18% of global production and 30% of global exports. ¹⁶⁸

The conflict’s impact on exports out of the Black Sea and on new-crop production prospects in the region, caused significant disruptions to global grain supply chains and risked food security in some developing nations.