The prognosis is looking good for barley prices, says the head of market analysis weather surveillance for the Canadian Wheat Board.
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_____ CORRECTION _____
A story about malting barley markets in the March 13 edition on page six should have said the 2008-09 pool return outlook backed off to a Saskatchewan farm gate is about $6.45 per bushel for two-row designated barley and $6 per bu. for six-row. Read Also
USDA’s August corn yield estimates are bearishThe yield estimates for wheat and soybeans were neutral to bullish, but these were largely a sideshow when compared with corn. |
Bruce Burnett conceded that many of the factors affecting prices this year are still in flux, such as weather, the price of U.S. corn, the quantity and quality of the 2008-09 world barley crop and the demand for feed and beer.
However, he said as of now, the market outlook is good.
“For malting barley the Pool Return Outlook is providing a pretty positive market signal, because we see limited competition and tight supplies until the new Australian crop comes off in December,” he said.
The 2008-09 PRO for malting barley is $360 a tonne, or $7.84 a bushel, for two row and $340 ($7.84) for six row. That works out to a Saskatchewan farmgate return of $4.92 a bu. for two row and $4.25 for six row.
By comparison, that’s about 30 percent higher than the PROs for the current 2007-08 marketing year, of $290 and $250 a tonne respectively.
World barley production is expected to increase by almost 10 percent in the coming year, to 143.9 million tonnes. Seeded area is expected to decline due to competition from high value crops, but that will be balanced off by a bigger Australian crop.
However, limited inventory of old crop, combined with continuing strong demand from customers like China and Latin America, will support prices over the coming months.
“Right now malt barley is extremely tight, especially in the European Union,” said Burnett.
“Unless they have a totally wonderful crop in volume and quality, they’ll be in a stock rebuilding phase so the pressure on the malt market will be a little less.”
The pressure on the malting barley market will come if the Australians get a sizable, good quality crop, after two terrible years.
The Aussies are selling off what’s left of their old-crop malting barley, which is keeping a lid on today’s market, but that will soon run out, providing a window for some good sales for Canada.
Greg Kostal, of Kostal Ag Consulting, said those prices mean malting barley will rank with durum as the best cereal grain option for 2008.
“If a farmer is agronomically comfortable growing malting barley, and if $6.50 produces a profit, the risk-reward factor favours growing it,” he said.
As for feed barley, export prices are expected to remain at strong levels in the export market.
The 2008-09 PRO for feed barley is $235 a tonne ($5.12 a bu.), which works out to $4.26 a bu. at the Alberta farmgate. The current 2007-08 PRO is $275 a tonne ($5.99).
The world market will be marked by increased production in the Black Sea region, the states of the former Soviet Union and Australia. Demand is expected to be strong from Saudi Arabia and other Middle Eastern countries, which should support export prices.
On the domestic side, the general expectation is for a flat to slightly lower price.
“The price signals are not all that strong,” said Charlie Pearson, market analyst with Alberta Agriculture. He added that can change depending on a number of factors including the state of the livestock industry and corn prices in the U.S.
As things look now, corn is unlikely to be a big factor in the Canadian feed market this year. Corn prices in the U.S. are around $270 to $280 a tonne landed in Alberta, versus $190 to $200 last year.
“We’ll likely feed a lot more barley this year,” he said, adding corn took about 20 percent of the Alberta feed market last year.
