Feed barley prices are being kept in check by an abundance of U.S. corn, says a trader.
Barley is selling for $215 per tonne delivered into a Lethbridge feedlot, up from about $170 per tonne a year ago.
That is a hefty 26 percent increase, but it won’t likely drift much higher because U.S. corn is selling for $220 per tonne into the same feedlot.
“It’s fairly similar,” said Allen Pirness, senior trader with Market Place Commodities Ltd., a merchandizing company located in Lethbridge.
“We don’t see that very often.”
That is because Canadian growers produced 7.3 million tonnes of barley this year, down from 8.8 million tonnes last year because of a combination of drought and reduced acres. The short crop supported feed barley prices.
“The economics have kind of pushed the cattle feeders to import corn,” he said.
The U.S. Grains Council is seizing the opportunity to pave the way for more corn and distillers dried grains with solubles (DDGS) exports to Canada.
It facilitated a trade mission to Lethbridge in October, in which council member companies toured cattle feedlots, feed manufacturers and rail facilities.
Tom Dowler, director of business development with Gowans Feed Consulting, helped organize the visit.
He said the timing is right because while barley prices are up, corn prices are down because of a bountiful harvest in the United States.
Growers there produced 370 million tonnes of corn, second only to last year’s record of 385 million tonnes.
Dowler said the mission was well received. Before the visit, one 100-car unit train of U.S. corn had moved into Lethbridge.
“Over the course of the week (that) we were there speaking with different groups, three unit trains sold into Alberta and my understanding is that is continuing,” he said.
Canada imported 670,000 tonnes of U.S. corn and 735,000 tonnes of U.S. DDGS in 2016-17, which was a 13 percent increase over the previous year. Dowler expects a further increase in 2017-18.
He believes most of the corn is being sold to larger feedlots, which can move through large volumes of the product, because the economics don’t work for smaller train shipments.
The trade mission included representatives from three U.S. companies that are focused on shipping DDGS and two companies that are more corn-oriented.
Dowler said many feedlots consistently feed DDGS. When prices are high they may comprise five percent of the ration but when they are competitive it can jump to 15 to 20 percent.
Pirness believes most of the U.S. trade will be for corn because DDGS are priced at $250 per tonne delivered.
“They’re marginal at that (price). They’re certainly not setting any tonnage records,” he said.
There has also been a change in product quality because ethanol plants are extracting more corn oil out of the DDGS before exporting the product.
“That fat used to end up in the DDGS and made it a higher energy product that was really desirable for finishing cattle,” said Pirness.
The change has made the product less desirable for feedlots.
However, U.S. corn is very much in the running, and exporters who are anxious to find a home for the huge corn crop are pushing it into the Lethbridge market.
“They’re really pounding the pavement this year looking for spots for U.S. corn,” said Pirness.
However, he said some feedlots may not want to change their rations or invest in equipment such as a corn roller mill just because the corn price is right this year.