Last week’s rally in feedgrains gave producers who have a good crop in
the bin or the field a chance to grab some good prices.
It’s a scenario that might repeat as weather scares haunt markets.
“There definitely are going to be some rallies like this until the end
of summer unless something miraculous happens,” said Calgary grain
broker Doug Chambers of GrainPlace.
He thinks livestock feeders panicked because of the state of feedgrains
north of Red Deer, which is one of the Prairies’ prime feedgrain
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production areas. In market terms, a miraculous event would be a 25 to
50 millimetre rain hitting the parched land north and east of Red Deer,
Chambers said.
The market gave back some ground June 28.
Last week, feedgrain futures soared on the Winnipeg Commodity Exchange,
and the cash market in parts of Alberta kept pace, Chambers said.
Last week, feed wheat sold in the Calgary area for $4.25 per bushel,
picked up, and there were bids for barley in the Shaunavon, Sask., area
of $3 per bu., picked up.
Edmonton area feeders were offering prices for feedgrains that
Lethbridge feeders wouldn’t go near.
Chambers was advising clients with a good-looking crop to take
advantage of those prices because there’s a good chance they won’t last.
“Logically, it doesn’t make sense that at the end of June we’re trading
futures higher than we traded all last year in the feed barley market
for new crop,” he said.
“There’s still a lot of time to make a lot of bushels of barley.”
Chambers said the condition of this year’s barley and feed wheat crops
is slightly better than last year.
Brad Wildeman, general manager of the Pound-Maker feedlot in Lanigan,
Sask., said feedgrain panic
hasn’t hit his area.
“This is more a futures rally than a real world rally,” Wildeman said.
“We’re not having any problem accessing grain.”
Feedgrain markets across North America are touchy because corn is
flowering, so hot weather could seriously reduce yields. That would be
bullish for prices.
And the prairie situation is unsettled because of the extreme weather
experienced so far.
But Wildeman said he doesn’t see a reason to panic yet.
“I have seen nothing yet to make me think there will be no barley crop
this fall,” he said.
“We don’t see a supply problem.”
Ken Ball of Benson Quinn-GMS said barley futures had “gone berserk,”
rising at double the rate of canola, even though canola is in a more
precarious position. He also said underlying fear for the U.S. corn
crop has created a fearful tone in the markets, and cattle feeders in
Canada are the ones who will suffer Ð perhaps permanently.
“They can’t make it on $4 barley,” Ball said. “That’s going to kill
them.”
Anne Dunford of Canfax said the fact corn prices are also rising will
put pressure on American cattle feeders too and help to level the
playing field.
But it still undermines Canadian beef’s position.
“The cattle feeding industry was certainly built on ample supplies of
reasonably priced feedgrains over the last 20 years,” she said.
“If you change that, there starts to be some questions about how
competitive we can be against other raisers of beef around the world.”
Wildeman said it’s better for cattle feeders to have barley prices rise
now than in the fall, because they can protect themselves by offering
lower calf prices in the fall. Last year feedlots suffered because feed
prices rose after most calves were bought. If feedgrain prices remain
high, cow-calf producers will lose this time in the form of lower calf
prices, Wildeman said.
Ball said the western Canadian feedgrains market is twitchy because
analysts have little idea of the overall state of prairie crops.
“It’s a jumble of conditions that makes it very difficult to estimate
things,” Ball said.
Chambers said rallies are going to be great for farmers south of the
Trans-Canada Highway, where crops are generally excellent. Through the
summer, those farmers should be able to take advantage of rallies to
sell some of their coming production.
But those in the parched belt can only watch prices come and go, and
rue the fact that they don’t have a crop to price.
Ball said the most recent rally is a bittersweet sight.
“It’s good to see prices up, but it’s just that it’s up for all the
wrong reasons.”
