Chinese Malthouses Still Want Australia’s ‘High-Quality’ Barley Despite Tariffs

Chinese breweries will 'pass the cost' of tariff to consumers

Shipments of Australian Barley Continue despite Trade Tariffs, Yangtze River, April 12, 2020. STR/AFP via Getty Images

Despite the 80 percent tariff imposed by the Chinese regime, companies in the communist nation continue to buy Australia’s high-quality barley for beer production.

Earlier this week Australian cargo ships were rerouted to other countries as China’s tariff came into effect, however,  a select few are finding their way into the Chinese market because of demand.

The 200-meter long cargo ship Federal Innoko delivered barley to beer hotspot Dalian, north-east China this week.

Another shipment of Australia’s barely is being carried by the Panama-flagged ship African Arrow and is expected to reach Dongjiakou in China’s northeast within the next week.

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China’s decision would not only hurt Australian farmers but Chinese malthouses using Australian barley, says Mark Modra, a South Australian (SA) farmer at Greenpatch on the Lower Eyre Peninsula and head of the SA Barley Advisory Committee.

“It’s difficult for them to change varieties or to a different barley overnight and we’ve worked closely with them to develop a malting industry using our varieties,” Modra said.

Australian barley growers and Chinese malthouses have had a relationship since the 1990s. For many years Australia has had the advantage over competitors in France, Canada, and the United States by being closer and offering better value for money.

The Australian government and barley farmers have rejected the findings of China’s investigation that led to the tariffs being imposed.

Chinese Customers Prefer Premium Beer

The regime’s tariffs on Australian barley has not scared off Chinese buyers who want high-quality barley for the production of premium beer.

While demand for beer at restaurants in China has dropped amid the CCP virus pandemic, Nikkei Asian Review has reported that “the popularity of premium beer has led to higher unit prices, with beer sales up about 37 percent to roughly $93 billion.”

Australian barley is considered one of the best in the world for brewing beer because it’s low-moisture and cleanliness make it a difficult product to replace.

“Despite the high tariffs, some Chinese buyers have to take these shipments as beer makers prefer Australian barley, which is high quality and gives good taste,” said Ma Wenfeng an analyst at Beijing Orient Agri-business Consultant Co Ltd.

“These high-end brands can simply pass the cost to downstream consumers.”

China is the world’s top producer and consumer of beer, according to the U.S.-based Beverage Trade Network. However, China does not fully rely on producing its own barley for malting. In fact, barley production in China is typically used for animal feed has been in decline for 14 years.

On March 24 Nikkei Asian Review reported that China Resources, the makers of Snow beer, will end the production of low-priced products to focus on premium beer. This is a move that could see cheaper beer less accessible.

Zhujiang Beer Group Co., Guangzhou, China, Dec 8, 2004. China Photos/GettyImages

Top Chinese beer company Tsingtao and the China Alcoholic Drinks Association (CADA) raised concerns that the tariffs in Australian barley would hurt the Chinese market, and “push up corn prices and increase trade uncertainty.”

Speaking to Bloomberg News, Shi Wei an analyst with Shanghai JC Intelligence Company theorised that one of the reasons Chinese companies have continued purchasing Australian barley is because they can store it in bonded warehouses, which are exempt from customs tariffs.

Wei states that Chinese buyers have done this before with American sorghum and distillers’ dried grains.