Duncan McKinnon doesn’t need a crystal ball to predict what will happen to coarse grain prices in 1999-2000.
He bases his predictions on the laws of supply and demand. Those suggest that prices will remain largely unchanged from the current crop year.
“At the world level, it looks like we still have lots of coarse grains,” said McKinnon, an analyst with Agriculture Canada.
“Supply is still considerably large, so we’re not expecting big price increases for the next year.”
He expects world coarse grain production to hit about 894 million tonnes, a slight increase from this crop year. The increased production combined with higher carry-in stocks will prevent any big price rallies in the next year.
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On the demand side, McKinnon expects world consumption of coarse grains to increase two percent in the coming crop year. Part of that demand will be driven by a slight recovery in Asian economies and by greater consumption in countries such as Russia and Ukraine. More corn use in the United States and China will also drive the demand upward, McKinnon predicted.
“But we are still going to have lots of supply around, unless there are some weather problems.”
And what does that mean for world prices?
Using the Chicago Board of Trade as a benchmark, McKinnon expects the average U.S. Gulf corn price to increase by roughly $5 per tonne (U.S.) to $105 per tonne. The U.S. Pacific Northwest feed barley price will likely remain unchanged at about $100 per tonne.
According to Agriculture Canada, the area seeded to coarse grains in Canada will decline in the coming crop year. While there will be only a slight decrease in barley and oat acreage, Canadian corn production is expected to drop 10 percent from the record 8.9 million tonnes grown this year.
Trying to predict Canadian feed barley prices is almost as tough as nailing jelly to the wall. The number of cattle-on-feed in Canada and the U.S. has declined, and the hog industry remains in turmoil.
“I’m not sure how that’s going to wash out,” said McKinnon, in reference to the slump in hog markets. “If there is herd liquidation going on, then there’s going to be less feed consumed there.”
Other factors include the supply of feed wheat.
Up slightly
However, at this time, the department is forecasting off-board feed barley prices at $105-$135 per tonne (in store Lethbridge), a modest increase from this crop year. That’s based on an assumption that domestic use of feed barley will not change, while carry-out stocks decline.
Analysts are also reluctant to place bets on what will happen with malting barley. Although prices offer no reason to crack open the champagne, a market analyst with the Canadian Wheat Board sees a glimmer of hope for the coming year.
Peter Watts thinks production of malting barley will dip below historical levels in both Canada and Australia due to this year’s modest prices.
China will have a lot to do with whether demand for malting barley recovers. China traditionally buys the largest share of two-row grown on the globe. Watts expects Chinese demand for malting barley to return to normal levels.
“I think that farmers shouldn’t be afraid to grow malting barley based on the current market. They’ll have to look to the pool return outlook when it’s released in March.
“I’d hate to see producers shy away from malting barley just at a time when prices are poised to recover.”
Those who do plant the crop should “maintain a diverse planting strategy,” he said, to keep risks low.
