Barley feed grain markets stay competitively priced
Western Canada feed barley cash pricing is relatively steady at or near marketing season highs for several weeks now. It is, however, edging back slightly of late.
Southern Alberta cattle feeders in the Lethbridge region quote feed barley around $5.50 per bushel for February-March delivery. Extending back into Saskatchewan, cash pricing opportunities reside around $4.50 per bushel (farm gate) for February-March movement.
There are no immediate red flags for this market, but it is justifiable to incrementally price feed grains into this higher priced market. Solid demand remains in play at home and abroad, along with tightening world supplies, keeping Prairie barley bids well-supported.
Here in Canada, this is the third consecutive year that total barley supplies declined. Although Canadian barley production increased about six per cent in 2018, the 2018-2019 supply declined four per cent due to sharply lower carry-in stocks from the previous marketing year.
Barley ending stocks for this year are currently forecast at one million tonnes, a tight level.
On the demand side, feedlot cattle inventories are running at seasonal highs in both Canada and the United States, meaning there’s more mouths chewing through this declining barley supply.
Total Canadian barley exports to date are also running well ahead of the level a year ago, with the latest weekly Canadian Grain Commission report showing total barley exports of 1.202 million tonnes as of Jan. 27. That’s about 312,000 tonnes ahead of last year’s pace.
Meanwhile, world barley stocks are projected to be historically low this year as nearly all the world’s major producer and exporters - including Australia, which experienced a severe drought - had smaller crops.
Given strong old crop pricing, it seems likely Canadian farmers are going to increase 2019 barley planted area this spring to something close to seven million acres, up seven per cent from last year. At the same time, other major exporters such as France, Russia, Ukraine and Australia are expected to increase barley acres as well.
A tightening Canadian barley supply-demand balance necessitates some measure in corn-wheat displacement in Prairie feed rations to make it work.
Sweet spot price
Barley is not looking for more demand. It's positioned itself into a demand-crimping sweet spot price to make it work. Canadian barley can maintain, at minimum, a 1 to 1.25 million tonne carryout.
It makes fundamental sense that barley is valued between a wheat price that could otherwise be exported and a landed U.S. corn price. This balance will likely remain intact for some time yet during this marketing season, at least until user anticipation of accessing presumably cheaper 2019 feed supply begins to destabilize the relative price competitiveness between feed grain alternatives.
For now, though, a weak Canadian dollar makes U.S. corn imports relatively expensive, while also supporting wheat export basis. American corn landed into the southern Alberta feedlot is believed to be offered at about CAD $260 per tonne delivered. This has helped to firm barley into $250 per tonne territory.
So then, feed barley maintains price support in this environment, staying just high enough to draw in sufficient alternative feed sources to complement overall feed demand for the livestock sector, though does not move too high and price itself out of the market. Feed barley price has found that competitive sweet spot right now.
In order to juice the feed barley market higher going forward energized rally for corn and wheat markets is likely required.
An energized rally for corn and wheat markets may be needed to push the feed barley market higher. Tweet this
After three consecutive years of barley supply decline in Canada, solid demand remains in play in here at home and abroad. Coupled with tightening world supplies, barley bids remain well-supported.
Mike Jubinville of Pro Farmer Canada offers information on commodity markets and marketing strategies. Call 204-654-4290 or visit www.pfcanada.com to find out more about his services.