Feed barley versus U.S. corn
- Competitively priced U.S. corn is entering southern Alberta as a feed ration substitute for higher priced feed barley
- Growers appear to be storing a sizeable quantity of unpriced barley in the hope of accessing the malt market
- Supply availability for U.S. corn this year remains burdensome
Prairie feed barley cash bids edged higher through the harvest season on reduced crop size ideas, but prices have stumbled a bit lately.
Feed barley cash bids in southern Alberta eased slightly from recent highs. Lethbridge-area cattle feeders reported at $210 per tonne ($4.60 per bushel). Strathmore-area feeders are $200 to $205 per tonne. Prices for feed barley in Saskatchewan are quoted at $3.30 to $3.65 per bushel.
Competitively-priced American corn is now entering southern Alberta as a feed ration substitute for higher priced feed barley. Hotter energy corn recently landed at $215 per tonne Lethbridge track.
Storing for malt
Growers appear to be storing a sizeable quantity of unpriced barley in the hope of accessing the malt market. Supplies of malt quality barley this year could be as high as four million tonnes out of a total crop of 7.5 million. Unfortunately, total industry malt barley requirements amount to only about 2.25 million tonnes annually, with remaining malt supply eventually going back into domestic feed channels, likely during the second half of the 2017-2018 marketing year.
Looking at the United States corn market, at 14.28 billion bushels, the U.S. Department of Agriculture's October forecast of 2017 corn production was 96 million bushels larger than their September forecast. U.S. average yield increased 1.9 bushels to 171.8 bushels per acre, while harvested acres decreased by 377,000 acres. Carry-in supply to start the new marketing year at 2.3 billion bushels, plus imports (50 million bushels) and the 14.28 billion bushel production equals a total 2017-2018 U.S. corn supply of 16.63 billion bushels.
The 2017-2018 marketing year consumption forecast increased by 35 million bushels in the latest USDA report to 14.29 billion bushels. Projected ending stocks for 2017-2018 changed very little, but still amounts to a hefty 2.34 billion bushels.
Supply availability for U.S. corn this year remains burdensome. It likely means price will require strong demand throughout this marketing year to lift values in any sustainable manner, particularly if production estimates continue to increase in subsequent USDA reports.
And note that in seven of the last 20 years, when the USDA's forecast of average corn yield increased in September and October, as it did this year, the November USDA report has a tendency to see yield and production forecasts increase again. The potential for a larger U.S. corn crop is continuing to develop and looks more likely given many of the yield reports currently coming out of the U.S. Corn Belt.
So then, corn prices will struggle to find support in the short run due to large corn stocks and the prospect of increasing production for the 2017 corn crop.
Corn as a feed market player
While Western Canada is not a significant corn producer, corn retains an important place in directing global grain markets, and the U.S. remains the dominant player
While Western Canada is not a significant corn producer, corn retains an important place in directing global grain markets and the U.S. remains the dominant player. And that influence of corn on Western Canada feed grain markets cannot be ignored.
In the past two weeks, I've heard reports of small U.S. corn tonnages traded into the Lethbridge area market at prices ranging from $209 to $216 per tonne. Not large amounts, but worthy to note that the price trend has been declining. Not a positive signal for nearby cash feed barely bids. As long as corn is within $10 per tonne of barley, feedlots could be encouraged to use corn.
This year's smaller barley crop helps increase prices, but there's competition from competitively prices American corn.
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.