Why feed barley prices are outpacing malt barley

The Prairie feed barley market remains strong, led by demand going into southern Alberta’s feedlot alley.

Lethbridge-area delivered feedlot barley bids surged this past week to as high as $238 a tonne ($5.20 a bushel) for March movement. April-May-June delivery prices into the region firmed to as high as $248 a tonne ($5.40 a bushel). Moving up into south central areas of Alberta, prices range from $4.50 to $4.75. In Saskatchewan, bids in western areas reached upwards of $4.50 a bushel for deferred delivery - $4 to $4.25 a bushel.

Tightened stocks

Stocks of feed barley have tightened more than expected this year, which has caught end-users off guard.

Stocks of feed barley have tightened more than expected this year, which caught end-users off guard. Throw in a slowdown in farmer deliveries and prices have trended steadily higher. These kinds of prices for feed barley are now almost equal to current bids for malt barley - a rare market occurrence.

The bullish price trend of Chicago corn futures through much of January, February and now March, along with recent weakness in the Canadian dollar, also keeps feed grain pricing in Western Canada well-supported.

More barley is drawn into export channels. According to Canadian Grain Commission data, Canada exported 1.1 million tonnes of barley as of March 4, compared to 639,000 tonnes at the same time last year.

Decline in world reserves

Procurement from the world's two largest barley importers, China and Saudi Arabia, is the driving force lifting world prices since a decline in world reserves to the lowest level in 30 years.

Meanwhile, there's been a sharp drop in this season’s barley harvest in Australia - only 5.8 million tonnes versus 9.2 million tonnes last season - helps strengthen export pricing.

Canada’s ability to participate more aggressively in the barley export market is challenged by rail transportation, which limits overall port capacity. 

Wheat for feed-use

Nonetheless, as supplies tighten, the Prairie market remains the driving force behind strengthening prices. It means wheat will be counted on to provide greater domestic feed-use inclusion, a trend that will likely continue into the start of the new crop marketing year. If so, then new crop feed barley will likely be close to the same export value of the lowest priced wheat choice that would otherwise be exported. 

Bottom line

The feed barley market continues its steady climb higher, now costing more for feed than for beer. It's expected wheat will provide greater domestic feed-use inclusion, likely into the start of the new crop marketing year.

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.