With the upcoming election, we’re all hearing plenty about different political views, structures and policies. Particularly so with regard to free markets, many believing government intervention is required so everyone gets a fair go.
One fact often missed is that free markets doesn’t mean the same price and terms.
Take Chinese barley purchasing at present. They are paying US$35/t more for Australian origin barley than where Canadian or Black Sea origin barley is trading.
Why is that? If free markets mean the lowest price wins, then Australian barley shouldn’t be moving anywhere.
The fact is grains aren’t ‘commodities’ like they used to be. Origin matters because that signifies and element of quality. The Chinese are paying a premium because the added quality is worth it (and they are concerned about a potential tariff).
This is why we need to forget about the ‘we feed the world’ narrative, because we don’t. We feed middle class. The middle class that is getting bigger and bigger and demanding better quality.