Farmers have been holding tight to their beloved barley this winter,
but some analysts suggest it’s time to break up and cash out.
“I’d probably take advantage of the premium and let her go,” said
analyst and broker Errol Anderson of the Pro Market Wire report.
Doug Chambers of Grain Place said most farmers would be wise to clear
their bins of barley before the end of the traditional spring price
bump, though some might not want to sell right now.
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“For the guy who has sold 80 percent and is able to load in April and
May, I would hang onto that other 20 percent (for then),” said
Chambers, a broker and analyst.
“The guy who has sold less than 50 percent better get some marketed
because if we get rain, wet snow or any moisture in March and April,
the bump that occurs in May may bump the price down by $5 from what we
have now.”
Barley has been a big money crop for producers lucky enough to have
some this winter. Drought in Alberta and Saskatchewan severely squeezed
supplies and prices have been bid up by cattle feeders needing to
secure supplies.
Because of the surge in barley prices, corn imports from the United
States also surged and many cattle feeders are using corn rather than
barley.
“It’s about 75 percent corn south of the number one highway,” Chambers
said.
That has stopped barley prices spiking as high as many producers had
hoped, so many have held onto substantial stocks.
The recent Statistics Canada report on grain stocks concluded there was
even less barley on the Prairies than most analysts expected, causing
barley futures to momentarily surge and encouraging some farmers to
keep their barley.
But Anderson cautioned producers not to base too much on that report.
“I don’t agree with the Stats Can numbers,” Anderson said. “I think
they’re wrong.”
There is more barley on farms than many expect and sellers will suffer
once buyers realize that.
“There’s going to be a drop in this barley. It may be after spring
field work,” Anderson said.
Barley prices often increase during spring because of road bans, which
makes it difficult for farmers to deliver, and because field work is
given priority over grain delivery.
Anderson said bids for barley delivered now are about $3.40 per bushel,
but bids for April and May are between $3.50 and $3.55.
“If I was a grower I would take advantage of having the barley move,”
Anderson said.
Chambers said barley growers should realize they have done well in the
past few months. Barley has been selling above its normal value
compared to corn.
They should also realize there is a long-term cost to high barley
prices – corn becomes attractive.
“This has done damage to the western Canadian barley industry for
years,” Chambers said. “This year if we had stayed within a $10 per
tonne premium over corn we would have kept a lot of these feeders on
barley. But the moment it went over $10 these guys started switching.”
Chambers said feeders have become used to using corn and found that the
cattle like it. That means next time barley prices rise beyond their
traditional relationship to corn, the feeders will be quicker to switch
to cheaper corn.
“The next time it may be a $5 spread, then maybe it’s even.”
Anderson said he doesn’t think barley has suffered long-term damage.
Buyers are businesspeople who look at the bottom line.
“Feeders will just feed what’s economical. They’ll switch back to
barley once it works its way down to where these guys can make some
money again.”
Chambers said cattle feeders reacted quickly to this year’s high barley
prices, but will act much faster next year if another drought further
restricts supplies.
“Not only is corn bumping barley out of the ration at a phenomenal
rate, but we are now seeing the feeder say, ‘if I have to feed corn, I
might as well feed corn in the United States.’ “
One major feeder he knows has reserved space to feed all his animals at
a U.S. feedlot next winter if there is another drought. Other corporate
feeding operations are considering the same option.
“These companies have to make money. If the company can make money
doing the actual feeding up here in their facilities and where they
have their investment, fine. If it’s losing money here and they can
make money having someone do it there, they’ll assign it there.”
Chambers said the long-touted advantage of barley-fed beef only goes so
far. That was proven this year.
