U.S. drought plays role in higher barley demand

More acres needed | Grain broker says Alberta barley went south straight from the combine to drought areas in the United States

More barley is needed to meet the increased demand for livestock feed and malt now that grain is trading on the open market. 


“If you are a producer, it is not hard to sell your feed barley. There is a buyer any day of the week,” said Jim Beusekom, a grain broker with Marketplace Commodities Inc. in Lethbridge.


“We need more acres of barley.”


The barley crop is 60 percent of what it used to be at around seven million acres.


“If we are going to export barley at the rate we have this year, without more acres it is not sustainable to the industry right now,” he told the Western Barley Growers Association’s annual meeting in Calgary Feb. 14.


He said barley was heading to the United States straight from the combine after the CWB monopoly ended last August. Some of those shipments were needed to fill grain shortfalls related to drought in the U.S., where crops were damaged across 70 percent of the country. 


Southern Alberta feedlots have always been primary barley buyers, but in the open market they are stock- piling and securing more future deliveries. However, he said some of those decisions this past year were affected more by the U.S. drought than the ending of the single desk and increased export sales. 


He said the new sales environment saw barley exported directly from southern Alberta, which was unusual considering the region is the centre of Alberta’s feedlot industry. However, barley from central and northern Alberta was not exported to the same degree. 


Beusekom said the barley was trucked to Montana and Idaho and loaded onto rail cars destined for California dairy farms, where feed specifications are similar to Alberta feedlots.


The volumes were not large, but companies went after the best prices at the time. Most barley is staying home now because prices are stronger in the local market. 


On the malt side, Beusekom said companies secured their supplies early on but Saskatchewan grain was shipped to North Dakota and Alberta malt went to Montana rather than sold offshore.


He said there is American demand for Canadian wheat, but producers need to know their quality. Wheat grading is subject to the U.S. grading system.


There are no issues in crossing the border, but freight rates could be higher. Most U.S. facilities are on the Burlington Northern Railroad, but some are set up to switch over to Canadian Pacific Railway. Fuel surcharges are higher and there are differences in protein discounts, premiums and dockage charges.


Price discovery is not much different, but producers need to get a handle on basis, which indicates the differences in grade, arbitrage and the time period it is shipped.


He said producers need to understand the seasonality of trading wheat and become educated. Plenty of market news is available, he added, but it is hard to sort through because of the amount of material and confliction information.