Two weeks ago, Kyle Sinclair was telling Alberta farmers that storing barley might be a good marketing strategy.
After all, many would have lots of bin space and the Alberta crop was going to be small, providing hopes for a post-harvest rally.
Then farmers started harvesting.
“We started to get calls from guys who hadn’t thought they had a problem with bin space, now thinking all of a sudden that they did,” said Sinclair, an analyst with CorNine Commodities of Lacombe.
The problem for the market, Sinclair thinks, is that lots of farmers seem to have bigger than expected barley crops.
“It’s a bit of a surprise.”
Jim Beusekom of Market Place Commodities of Lethbridge said he’s hearing the same thing.
“It certainly seems like it’s better than what most people thought it would be,” said Beusekom.
“I’m not hearing too many people being disappointed.”
While neither Sinclair nor Beusekom expects the western barley crop to be spectacular, coming in average will clash with expectations that many Alberta and western Saskatchewan crops would be stunted and low-yielding. Instead, many crops from the dry areas actually appear OK.
“Guys were thinking the good areas would be average and the bad areas would be a roll of the dice,” said Sinclair.
“Now guys are getting into it and the bad areas look average and the good areas look excellent.”
Some crops are yielding more than 100 bushels per acre.
That has Sinclair suggesting farmers now do some pricing of feed barley, since the hopes for a post-harvest rally are fading. Today’s Calgary delivered prices of $205-$210 per tonne might not be the harvest pressure low of the season.
“You could be trying to get this price that you’re seeing now throughout the winter,” said Sinclair.
Beusekom said he’s more hopeful of a small price rise after harvest, but with bigger crops out there it might be only a $10 to $15 rally.
The factor to watch now is the U.S. corn crop, which sets the bedrock for North American feedgrain prices, Beusekom said. Also, the condition of malting barley varieties and wheat values will affect feed barley values.
Right now malt barley buyers seem to be hungry for supplies, so farmers aren’t dumping those crops into the feed market.
And wheat quality in the western Prairies seems good, so some of the feed-type varieties might end up in the export market. However, weak overall wheat values are dragging much borderline wheat back into the feedgrains market, so there might be more pressure from there, Sinclair said.
The problem for barley prices, Sinclair said, is that today’s prices could become the market’s new resistance levels if a bigger crop comes in.
Instead of barley bottoming at $200 and then bouncing, that $200-$210 level could become the top of the market, and the bottom at $175.
“If it corrects below ($200), the floor (today) becomes the new ceiling,” said Sinclair.
“It’ll be a bit of a shock because people were expecting it to stay above this level.”