Canadian barley carryout is forecast to be the lowest in six decades.
Agriculture Canada estimates 900,000 tonnes of carryout. Index Mundi has charted ending stocks going back to 1960 and they have never been lower.
Neil Townsend, senior market analyst with FarmLink Marketing Solutions, said the low stocks are the result of a combination of factors.
Canadian barley acres are hovering around the 60-year lows and there have been good malting barley exports to China, but the biggest factor is that the Canadian feed industry has been a voracious consumer of the crop.
“Animal numbers in Western Canada are pretty strong, so we’ve had good feeding of barley,” he said.
Feed prices vary widely but feedlots have commonly paid $5 per bushel for old crop feed barley in 2018-19. The last couple of years the price has been below $4 and before that $2.50 to $3 was the norm.
“This is a very strong price right now,” said Townsend.
He wouldn’t be surprised if old crop prices appreciated further in the May/June/July period if dry conditions persist on the Prairies and buyers decide to stock up.
New crop feed barley prices are about $1 per bushel lower, indicating that the market believes the supply of feedgrains in Western Canada will be on the rise in 2019.
Feed prices have been somewhat capped by the abundance of U.S. corn supplies.
“Corn has been an arbitrage threat all year, and some corn has moved in,” he said.
The value of U.S. corn exports to Canada through the first six months of 2018-19 was US$197 million, which is double what it was during the same period a year ago.
There could have been even more corn moving north if it hadn’t been for a shortage of trucks and rail cars, said Townsend.
One factor that has aided feed barley sales is the top-notch quality of last year’s wheat and durum crops. Farmers are holding onto those crops in hopes of attaining higher prices in export markets rather than selling them for feed.
However, feed prices have climbed to the point where growers are loosening their grip on their wheat and durum supplies.
“I’ve already heard a lot of very high quality No. 1 and No. 2 durum is working its way into feed channels in Western Canada,” said Townsend.
The other major factor behind Canada’s dwindling barley supply is China. The country purchased 938,500 tonnes of the crop through the first seven months of the crop year. That is slightly behind the previous year’s pace but well above the five-year average.
He said China tends to be less fussy about its malt quality specifications than North American maltsters.
“To get to the numbers that the Chinese are getting, they’re taking an assortment of barley,” said Townsend.
Malt barley is selling at a 50 cents per bushel premium over feed barley in Western Canada.
Agriculture Canada is forecasting that 7.4 million acres of barley will be planted this spring, a 14 percent increase over last year.
FarmLink’s estimate is closer to 10 percent, which is still a big increase. Hog and beef producers are hopeful there will be strong export demand from China in 2019-20 as its hog herd continues to be devastated by African swine fever.
“Nobody in the U.S. or Canada is looking at backing off herd size,” he said.
Barley is a cheap crop to plant compared to other crops and it has a relatively short growing season, two attributes that may factor into seeding decisions.