Stressful weather, reduced acreage shrinks feed supply while deteriorating grass conditions could push cattle into feedlots
A surge in feed barley prices in late June and early July caught many market watchers and buyers off guard.
Most traders assumed prices would eventually rise, but the abrupt jump higher was a surprise.
“I think the trade was shocked at how quickly it went from ‘we will eventually get higher’ to ‘we are higher,’ ” said Brandon Motz, market manager with CorNine Commodities, a grain marketing company in Lacombe, Alta.
Motz, like others, witnessed a rapid rise in feed barley prices over a period of days.
“Back on June 28 I was (offering) $181 (per tonne) delivered to Picture Butte (near Lethbridge),” he said.
“And on July 6 I was offering $205…. There was a 10 day period where we rallied $24.”
The weekly crop market review from Alberta Agriculture shows that feed barley delivered to Lethbridge, was trading around $165 per tonne in mid April.
In June prices had settled in around $175 to $180 a tonne before jumping over the $200 mark in late June and early July.
Canfax, the market analysis division of the Canadian Cattlemen’s Association, said feed barley prices are now at the highest point of the year.
Allen Pirness, senior trader with Market Place Commodities in Lethbridge, said a couple of factors were responsible for the rally.
Barley acres in Western Canada are estimated at 5.77 million, down from 6.4 million last year and the smallest since 1964. A large part of the Canadian Prairies has had below normal rainfall since seeding.
As well, a northern U.S. Plains drought is burning up the wheat crop in North Dakota, Montana and South Dakota. The dry conditions caused an early summer spike in wheat prices.
Feed wheat is an alternative to barley, so higher wheat prices pull feed barley higher.
Feed barley values may continue to rise, but there is a price cap on the rally, Pirness said.
“We’re getting to the point where you’re starting to see the substitution effect take place,” he said, noting cattle feedlot owners in Alberta would consider corn or dried distillers grain instead of barley.
“Corn coming out of Manitoba, it’s around these (price) levels … (and) corn DDGs coming out of the Midwest, they’re landing up here around $230.”
There might be a short-term downturn in prices, but higher feed barley prices could be the new normal over the mid and longer term, Motz said.
“When the market rallies this hard and fast, you can’t help prepare for some sort of correction,” he said. “But we definitely have set a new pace, and I think we’ll hold onto some sort of this value, moving forward…. It will be higher coming into the fall.”
Motz said hot, dry weather could cut into crop yields in Western Canada, which would diminish feedgrain supplies and reduce the amount of time cattle spend on pasture.
“If we burn up and dry out … you will shrink the crop size,” he said.
“We’ve got some grass that’s starting to wilt, and some of those cattle will have to come to feed a little sooner than expected.”