Australia’s barley trade with one of the most lucrative markets in the world has effectively ended overnight. Here’s why farmers can’t just sell it for the same price somewhere else.

Australia’s barley farmers have found themselves in the middle of a global feud this week, with rising trade tensions flaring against the backdrop of a likely international inquiry into the origins of COVID-19.
The conflict came to a head late last night, with the Chinese Government announcing it would press ahead with its threat to impose an 80 per cent tariff on Australian barley effectively blocking Australian farmers from selling their crops to their most lucrative market.
The decision could cost Australian farmers hundreds of millions of dollars and is being vehemently opposed by the Australian Government.
Here’s what you need to know.
Why is China introducing a tariff?
China has actually introduced two tariffs on the import of Australian barley the first is a hefty 73.6 per cent, because it claims Australia sold barley into China for cheaper than it cost to grow it, also known as “dumping” it.
The other 6.9 per cent tariff is because China claims Australian farmers are subsidised by the Australian Government to grow their crops.
The introduction of the tariffs, effective from today, follows an 18-month investigation into claims Australia dumped barley in China over a number of years.
The tariffs are linked to allegations Australia dumped barley into the Chinese market.(ABC Rural: Jo Prendergast)
Australia had always expected China to respond to the investigation at about this time, but the decision has still inflamed tensions, with the countries already at loggerheads over Beijing’s handling of the COVID-19 pandemic.
Last month, China’s Ambassador to Australia threatened the prospect of a consumer boycott of Australian exports after Prime Minister Scott Morrison called for an inquiry into the origins of the pandemic.
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Adding fuel to the fire, two days after China announced its intentions to set the barley tariffs, China suspended four Australian abattoirs from selling beef to China.
But the Australian Government maintains the trade disruptions are not linked to each other, or its call for a COVID-19 inquiry.
Do China’s allegations hold up?
No.
Both the OECD and the Federal Government consider Australian farmers to be among the least subsidised in the world, receiving little government assistance to grow food and fibre.
Barley imports fetch a premium in China, as much of it goes towards brewing.(ABC News: Hugh Sando)
China argued that Australian Government initiatives in the Murray-Darling Basin, which paid farmers to upgrade water infrastructure in return for giving up water rights, were a form of subsidy.
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But Trade Minister Simon Birmingham said that was “completely ridiculous”, given the majority of export barley is grown in Western Australia, thousands of kilometres from the Murray-Darling Basin.
Australia also denies any dumping of barley, and after a thorough investigation, both the Government and the grains industry believe there is no evidence to support China’s claims that Australian farmers had sold barley into China for less than it cost to produce.
Beer was the key to barley boom in China
Australia’s barley growers have now effectively lost access to their most valuable market.
Farmers and traders say the tariffs make it unviable to sell their barley to China, and while it’s likely they’ll find new markets to sell the Australian-grown barley in, it’s unlikely to be as lucrative.
That’s because China paid a premium for much of the barley it bought, because it was used to make beer.
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The remainder of the barley sold into China went to livestock feed.
In 2018, Australia sold $1.5 billion worth of barley to China but the drought and China’s allegations of dumping saw the value of the trade fall to $600 million last year.
It has been 10 days since China proposed the 80 per cent tariffs and already prices for Australian barley have fallen 20-30 per cent.
There are also concerns about whether six shipments of Australian barley currently at sea and bound for China will be taxed, though already one shipment is understood to have been diverted to another market.
Where will Australian farmers sell their barley now?
Japan, Thailand and Saudi Arabia are all likely markets for Australian barley, but they would predominantly use the grain to feed livestock, therefore paying less than the breweries in China.
However, given the drought has decimated domestic stocks in recent years, it could also be absorbed in part here in Australia.
Meanwhile, Australian Government officials are considering taking the matter to the World Trade Organization to argue China erred in bringing in the new tariffs.
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