Rise in U.S. demand | A small American barley crop will have buyers looking elsewhere for supply
Potential problems with the U.S. barley crop could force malt companies to look north of the border for supplies, but they might not find willing sellers.
“There’s going to be lots of demand for (Canadian) barley, which is going to keep that malt-feed spread really, really wide,” said Chuck Penner, an analyst with LeftField Commodity Research.
A massive U.S. corn crop is expected to weigh down feed barley prices, while a faltering U.S. barley crop should create huge interest in Canadian supplies, attracting everything of borderline quality.
“How’s that for bullish?” he said.
Doyle Lentz, president of the U.S. National Barley Growers Association, said yield prospects are good, but crop quality is rapidly deteriorating.
“Our trouble here is similar to Canada. The weather has been so bad I’m visiting with you today,” Lentz, who farms near Rolla, North Dakota, said Aug. 27.
“I should be in a combine. We’re just not getting the crop off, and the quality is deteriorating every day.”
Only 10 percent of the North Dakota crop had been harvested as of the end of August compared to the usual 80 percent.
“There is just far too many unharvested acres right now for this time of year,” said Lentz.
Those acres have been exposed to heavy rain across the main barley growing states of Montana, Idaho and North Dakota, which account for 70 percent of the U.S. crop.
“They’ve had these really, really odd storms that have went through Idaho this year,” Lentz said.
“They really don’t get any precipitation in August, and they’ve been deluged out there.”
Just about every county in western North Dakota has had record rainfall in August, and Montana has also been subjected to widespread heavy precipitation.
All the rain and corresponding humidity have created considerable unease about crop quality. Early harvest samples indicate that sprouting and vomitoxin are going to be big problems.
“There’s a right for concern, that’s for sure,” said Lentz.
The U.S. Department of Agriculture is forecasting a 4.27 million tonne U.S. barley crop, which would be the third smallest crop in the last half century. Fifty-five to 60 percent of the U.S. barley crop is used for malt.
“They don’t have a lot of wiggle room,” said Penner.
“They’re going to have to go somewhere, and the next best place is Canada.”
However, they might find they’re dealing with a surly group of Canadian growers, said Martin Hall, vice-president of the Western Barley Growers Association.
“Last year we had a big barley crop and they couldn’t wait to screw guys over on contracts, so now this year they’re going to have a little more trouble dealing with the farmers because farmers have a longer memory than they do,” he said.
Hall said maltsters on both sides of the border reneged on contract terms and generally made life difficult for growers with long payment times and minimal communication.
“We were hoping that when we got rid of the (Canadian) Wheat Board, the middleman between the maltster and the farmer, we could cultivate a better relationship and cut some of this stuff out, but they still seem to have the same attitude,” he said.
Hall believes it is time to revisit the idea of creating an agricultural commodity clearinghouse in Western Canada, a concept originally floated by barley growers in 2008. It would be like a PayPal for crop transactions.
“When someone tries to renege on the contract, you can take them to task on it. The way the current system is, they can just walk,” he said.
Buyers will not have the upper hand this year because of the potential for a looming shortage of malt barley in North America.
Statistics Canada is forecasting 7.2 million tonnes of Canadian barley production, down 30 percent from last year and the smallest crop since 1968.
The crop grown in the southern Prairies has been exposed to late-August rain that some analysts believe caused considerable sprouting damage.
Penner doesn’t think the Canadian crop will be as bad as the U.S. crop because the harvest rain was more intense and lasted longer south of the border.
There is also a lot of barley grown in the black soil zone, which dodged the harmful August rain. It should be in good shape, barring any further rain.
His advice to growers is to avoid selling anything that is borderline malt quality into the feed market because supplies of good quality U.S. barley will quickly dwindle this winter.