The good news for prairie barley growers is that most analysts expect little U.S. corn to come into Western Canada this autumn and winter.
The bad news is that the corn is being kept out by large supplies of cheapening Canadian barley.
“We’re not likely to need to import corn,” said Alberta Agriculture grain market analyst Charlie Pearson.
Canadian Wheat Board analyst Dwayne Lee agreed.
“I think barley prices will adjust (to the large U.S. corn crop by dropping). I don’t think much corn will come in,” said Lee.
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The yield estimates for wheat and soybeans were neutral to bullish, but these were largely a sideshow when compared with corn.
On Oct. 10, the United States Department of Agriculture released a production report that found slightly more corn in the U.S. than analysts had expected.
The report concluded that soybean yields had been significantly reduced by the summer heat wave but corn had held up and was better than the USDA and analysts expected. Corn futures prices at the Chicago Board of Trade quickly fell by three cents per bushel after the report was released.
The USDA found that American farmers produced a 10.2 billion bu. corn crop this summer – an all-time record.
Corn is the biggest feed grain crop produced in North America and sets the price foundation for other feed grains such as barley and oats.
Last autumn vast amounts of U.S. corn began arriving in prairie feedlots as operators reacted to short supplies of expensive barley by importing much cheaper U.S. corn.
Corn is cheap again this year, but there is much more barley on prairie farms and its price is back in line with corn.
Pearson said U.S. corn can be brought into southern Alberta for $140-$145 per tonne, while barley costs $125-$128 per tonne.
Corn has more energy per tonne value than barley, but barley’s price right now is probably low enough to keep feeders buying it.
“I think we’d have to have barley get up to close to $140 per tonne before you would start to see major amounts of corn move in,” said Pearson.
Some analysts worried last year that two years of drought might turn barley buyers into long-term corn buyers.
Pearson said feedlot operators are now more willing to order corn than they were before the drought, so if barley and corn prices become equivalent, some might go for corn.
Some found large amounts of corn easier to source than large amounts of barley, even in a good year.
“With one phone call you can book 50 (rail) cars of corn,” said Pearson.
Oats prices haven’t been too badly damaged by falling corn prices, but that’s because oats were already cheap because of big Canadian supplies this year.
Prices shouldn’t slip much unless Canadian farmers start selling more oats. So far, few are selling, which has shored up the sagging price.
Chicago oats futures prices should stay above $1.40 US per bushel, unless the European Union introduces an oats export subsidy, said Randy Strychar of Statcom Ltd.
Analyst Errol Anderson of Pro Market Communications said he doesn’t expect barley prices to recover soon.
“Through the month of October it’s going to be hard.
“The barley market probably won’t restart itself until January,” said Anderson.
Cattle feeding is down about 40 percent this year as feedlot operators shy away from filling their pens. They are likely to start feeding more after Christmas.
Not only is demand likely to be poor for the rest of this calendar year, the glut of corn means buyers have lots of feed grains to choose from.
“Corn is going to have a tough go of it because the world (supplies) are large right now, so we can probably go a bit lower in corn (prices) and that’s going to pull the western barley futures lower,” said Anderson.
