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Pressured by Chinese Tariffs, Australian Farmers Are Growing New Markets | Instant News


SYDNEY – Alan Sattler had been in his tractor for three hours one morning in May, sowing hundreds of kilograms of barley seeds in Western Australia’s dry wheat belt, when he received a text message from his wheat broker. China, its biggest market, imposes punitive tariffs on Australian barley.

Mr. Sattler surveyed his 8,000 acre farm where he had grown 2,500 acres of barley. He called the broker. Now what are we going to do? Mr. Sattler pleaded, preying on his question with “a few interesting curses.”

Australian barley growers are China’s first targets in a a widespread trade dispute out for commodities including coal, grapes and rock lobster. China has been angered by Australian Prime Minister Scott Morrison’s calls for an international investigation into the first outbreak of Covid-19 in central China, seen as interference by foreign governments.

The trade dispute has hurt the country’s barley farmers, which previously exported up to 70% of their crop to China. However, the industry has largely weathered the effects of tariffs, with increased exports of barley and very few bankruptcies, suggesting that trade pressures are restricting certain industries. Many of the tactics they use to survive are now being copied by other exporters, such as Australian winemakers and salmon growers.

Market Movements

Australian barley is heading to the Middle East and Southeast Asia as sales to China dry up.

Export barley all over the world

Export barley all over the world

Export barley all over the world

Export barley all over the world

Total barley exports are expected to increase by 64% in the 12 months to October 2021. Traders have been catching up on sales in other big markets like the Middle East, although that comes with a painful trade-off: Middle Eastern consumers mostly use barley for animal feed, not for making beer, and usually pay less.

Farmers are also switching from barley to crops such as wheat, a trade that China does not dominate. They have sought a unified response, such as by supporting Australia’s challenge on barley tariffs at the World Trade Organization, to prevent divisions that China could exploit.

Barley that is harvested on Mr’s farm. Sattler. Australian farmers seek export markets outside China, such as Saudi Arabia.

Australia’s barley exports to China were worth about $ 1 billion annually before Beijing accused farmers of being subsidized to sell at unfairly low prices and imposing 80.5% tariffs, according to an analytics firm.

IHS Markit.

Many growers have poured profits into developing the barley variety that Chinese malt makers and brewers are seeking.

Other industries have also developed to feed industrialized China and its increasingly affluent middle class. China buys about 80% of Australia’s iron ore, and was a major customer of Australian wine, beef and timber before trade tensions escalated. Australia is a a popular destination for Chinese tourists and students before the pandemic closed national borders.

A decade ago, China accounted for less than a quarter of Australian exports. The share of China is now about 40%. The pandemic has increased Australia’s dependence, as China’s recovery has outpaced other major economies.

Australia is not alone in its dependence on China. In 2001, when China joined the World Trade Organization, more than 80% of countries with publicly available data recorded more trade with the US than China, according to Australia’s Lowy Institute, a foreign policy think tank. In 2018, two-thirds of countries traded more with China than the US

Beijing is increasingly using the weight of its growing economy as leverage to achieve its foreign policy goals. Over the past decade, China has used so-called coercive diplomacy 152 times, affecting 27 countries as well as the European Union, according to an August report by the Australian Strategic Policy Institute, a government-backed security think-tank. It said 113 of those cases had occurred since early 2018.

Australia’s Top Exports

China imports most of Australia’s top 10 exports.

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“The current trade disruption with China, whether related to meat, barley, lobster or wood, is not an isolated incident,” said Rex Patrick, an upper house lawmaker who is out of sync with Australia’s mainstream parties. “Rather it is a pattern of deliberate punitive action by the Chinese Communist government that puts politics above fair trade.”

Australia has been the heaviest target of China’s coercive diplomacy, ASPI said. Prior to Morrison’s call to investigate the origins of the pandemic, Australia had banned Chinese telecommunications company Huawei Technologies Co. and

ZTE Corp.

of the next generation of 5G mobile networks while also criminalizing foreign interference in domestic policies that many think are aimed at China.

As trade relations deteriorated, China criticized Australia for increasing trade barriers. “Since 2016, the Australian government has launched 25 anti-dumping and anti-subsidized investigations of Chinese products,” said a spokesman for the Chinese Embassy in Australia in December.

Beijing has fulfilled its obligations under the free trade agreement with Australia, the spokesman added.

China imposes tariffs of up to 212% on Australian wine, prompting politicians around the world to criticize what it calls “bullying” Beijing. WSJ visits winemakers who hope global attention will help the industry. Photo: Lisa Maree Williams / Getty Images

How Australia’s barley industry copes with Beijing’s reaction could offer lessons to countries that have angered China and hit punitive tariffs. Farmers like Mr Sattler have been hit hard, but are able to cultivate other buyers for their barley crop before switching to other crops.

“A friend of mine said, if you were sitting on the front porch, you would hear 3,950 augers being transferred from barley to wheat” on the day the rates were announced, Mr said. Sattler, 52, a fourth generation farmer.

The barley fields harvested on Mr. Sattler. Some farmers have turned to crops such as wheat, a trade that China does not dominate.

Mr Sattler will cut the barley program in half this year, although he cites crop rotation as well as weak prices for the change.

South Australian producer Andrew Barr plans to cut the share of barley from the farm he inherited from his father to 20%, from about a third last year. This will be the least amount of space allocated to grain for 20 years on the farm.

Another tactic used by the Australian barley industry is growing the market from the Middle East to Japan and Southeast Asia, and even as far as Mexico, reducing its vulnerability to future trade squabbles even if Chinese tariffs are lifted. Traders project that Saudi Arabia will become Australia’s biggest market this year.

“We are happy to sell it to them, and that got us out of jail this season,” said Barr. “But that’s not what I expect from a long-term solution.”

Mr Barr wants the industry to look for malt makers in Korea, Japan, Vietnam, Thailand and India. These markets pay a premium for higher quality barley and are closer to those of the Middle East, which means lower shipping costs.

There are already signs that other industries are copying the move.

Treasury Vineyards Ltd.

, facing Chinese import tariffs for wine of 169%, plans to ship allocated wines to China to other Asian countries as well as to the US and Europe. The company will also increase marketing in these places.

“We immediately called the barley people to talk to them about their experiences, get their advice on how to deal with it and the approach to take,” Tony Battaglene, chief executive officer of Australian Grape & Wine Inc., an association of grape growers and wine producers, said Chinese fare over Australian wine.

Even industries that have so far avoided Chinese restrictions are responding.

Huon Cultivation Group Ltd.

, an Australian fish farmer, decided early last year to ship salmon to the US that had been allocated to China and said it hopes to cut sales to China more to diversify from that market.

This strategic shift will not be easy or quick as exporters face stiff competition, and not all businesses can adopt the same guidelines. Farmers can switch between crops with relative ease.

Australia began consultations with China on January 28, the first step in the WTO settlement process. Trade Minister Dan Tehan said Canberra was considering next steps, including whether to ask a WTO panel judge.

For Australia, commodities like barley are part of its economy. “This is huge for barley farmers,” said AMP Capital chief economist Shane Oliver about the tariff. “But it’s not a disaster for Australia.”

Mr. Sattler with Copper’s dog. Farmers say he is cutting the barley program in half this year.

So far, the market targeted by China only accounts for about 1% of Australia’s gross domestic product, he said.

For many, a market realignment away from China is long overdue, even if it brings short-term suffering to exporters.

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How do you think countries like Australia should deal with economic coercion? Join the conversation below.

John Blaxland, a professor of international security and intelligence studies at the Australian National University, said Australia’s trade relations with China had reached a turning point reminiscent of Britain’s decision in the 1970s to join the European Union. At that time, Australia was forced to divert its trade efforts from Britain.

“We have been leaning towards the biggest prize for the last two decades: China,” said Prof. Blaxland. “In doing so, we have neglected opportunities closer to home.”

Write to Rhiannon Hoyle at [email protected]

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Texas Blackout Raises Australian Banks To $ 215 Million | Instant News


Freeze it plunging millions of Texans into darkness rippling through energy markets in unpredictable ways, yielding financial gains for Australian banks and severe suffering for other companies caught in the disruption.

Extreme weather froze wind turbines and oil and gas wells, shut down oil refineries and pushed power plants out of operation, sending shocks through energy markets. Wholesale electricity prices skyrocketed, as did spot prices for natural gas in Texas, Oklahoma, Kansas, and Arkansas.

The turbulence brings profit to commodity traders at Macquarie Group Ltd. Australia, whose ability to deliver gas and electricity across the country allows it to take advantage of soaring demand and prices in states like Texas.

The bank raised its guidance on Monday for revenue this year through March to reflect windfall winds. It said that the net profit after tax would be 5% to 10% higher than for fiscal year 2020. That equates to an increase of up to 273.1 million Australian dollars or the equivalent of approximately $ 215 million. In an earlier guide, issued Feb.9, Macquarie said it expects profits to drop slightly in 2020.

“Extreme winter weather conditions in North America have significantly increased short-term client demand for Macquarie’s ability to maintain critical physical supplies across the commodity complex, and in particular in relation to gas and electricity,” the bank said.

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US Report Allows Russia’s Pipeline Project to Continue, for Now | Instant News


The State Department in a report to Congress did not identify the new company as a target for sanctions related to a $ 11 billion pipeline designed to deliver Russian natural gas to Germany, allowing pipeline work to continue for now.

Some Republican lawmakers have criticized the State Department for the Nord Stream 2 report, which is required by Congress, and both Republicans and a key Democrat are asking for an explanation of government positions.

The Trump administration, urged by Congress, signed legislation in 2019 and 2020 that stopped construction of the pipeline for more than a year until resumption earlier this month. The Biden administration called the project a “bad deal,” but Nord Stream 2 is forming a pressure point between the new government and the bipartisan Congressional coalition that has attacked the project.

The report is expected to provide list of companies involved in pipeline construction and therefore subject to US sanctions. In contrast, the State Department named two entities previously sanctioned by the Trump administration – the main pipeline laying vessel and its owner – along with 18 companies, mostly insurers, that had either left or left the project.

Failure to set new targets for sanctions allows work to continue while also allowing time for administration discussions with Germany about the project and to formulate its own policies on the pipeline.

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Food Prices Continue to Rise. Expect Larger Grocery Bills. | Instant News


An employee at a supermarket in Miami, Florida.

Jayme Gershen / Bloomberg

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AIG Profit falls on disasters, travel insurance | Instant News



Insurance conglomerate American International Group Inc.’s net income was recorded as a loss on mark-to-market hedging programs primarily for certain products sold by its life insurance business. The company’s closely watched adjusted profit fell 10% in the fourth quarter, penalized by additional costs from Covid-19. In the life insurance industry, Wall Street analysts view these mark-to-market movements as a less important performance measure than adjusted earnings, which excludes items considered non-recurring. The value of hedges jumps in response to changes in interest rates, stock markets, corporate credit spreads and other factors. Including these hedges, AIG recorded a net loss of $ 60 million for the fourth quarter, down from $ 922 million in the same period a year earlier. Its “adjusted profit after tax” fell 10%, from $ 923 million to $ 827 million. AIG’s main general insurance unit sells a range of property and casualty coverages to affluent businesses and households and is one of the largest sellers of travel insurance in the country in terms of premium volume. .



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