This year’s bountiful harvest is good news for the North American livestock sector.
The surplus of barley and corn means cheaper grain after several years of nearly unaffordable rations and subsequent record losses in the feeding business.
Kenric Exner of Viterra said it is difficult to move all that grain to where it is needed because of a lack of storage and rail cars.
Transportation is over-subscribed because trucks and trains move other commodities besides grain.
There’s also a limit to how much the market can use, he added.
“We had 25 percent more production, but when we look at demand, it is only increasing by four percent,” Exner told the Canfax Market Forum in Calgary Nov. 27.
Feed barley yields were phenomenal, averaging 70 bushels per acre this year because of ideal growing conditions.
“I am projecting 10 million tonnes of production this year,” he said.
The estimate may be higher than what other analysts project, but he believes it is accurate based on re-ports from Viterra’s elevators.
Feedlots used one million tonnes of wheat last year, but it will likely be replaced with barley this year because it is the cheapest available feed.
He said the U.S. corn harvest was abundant, causing its price to fall, and could drop well below $4 per bushel. That is adding downward pressure to barley.
“Where that (price) floor is, I can’t even speculate. It is all about supply and demand and this glut of inventories and how we are going to work our way through it,” he said.
Duane Lenz of the U.S. market analysis firm Cattlefax said many factors affect the price of corn.
The U.S. government has proposed relaxing its renewable fuel mandate for ethanol production and that could reduce corn demand.
Also, demand might be affected because other feedstuffs are used to make fuel.
If it were not for ethanol taking more than a third of the corn crop, it would trade at around $3 US, but it is likely to average $4.25 a bu. next year. If the spring is dry it could rise to $4.95, Lenz said.
“We think the low will be $3.50 and we will spend a lot of time at $4.25, give or take a little.”
More acres are going into feed corn in Manitoba and Saskatchewan, which will also need a home. It is unlikely any American corn will come north.
“In years like this, it is very difficult for us to import U.S. corn and put it into the Alberta feed market,” Exner said.
Barley has turned into a land locked crop in Canada with a large proportion going to the western feed market.
Exner is bearish on exports to the U.S. because of its large corn crop and limited rail cars available to move it south.
He is more optimistic about offshore exports to places such as Japan and Saudi Arabia. The Saudis import eight million tonnes of barley a year.
China is a major importer of Canadian malt barley and may be looking for feed barley this year for the first time.