Price forecast | Last year’s prices won’t be paid for this year’s crop
Farmers don’t want to bite the bullet and contract new crop malting barley at prices lower than what was offered recently for old crop.
That’s what marketers are saying about farmers’ lack of interest in pricing beer barley, but some think the reluctance is a mistake.
“They’ve been getting $6.50 (per bushel) for old crop, and now they’re seeing (new crop) bids of $5.50, which I think are pretty darned good, actually, and they don’t want to sell, but I think they should sell at least some at that price,” said CWB barley marketer Bob Cuthbert.
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“In a couple of months, $5.50 might look really good.”
Barley had benefited greatly from last summer’s drought-induced rally, rising high as corn soared.
Feed corn drove the rally and feed barley followed. To guarantee supply, maltsters had to boost prices and keep a hefty premium of $1 to $1.50 through the winter.
However, both the base feedgrain price and the malting premium are under threat because of the perception that farmers are likely to harvest big barley and corn crops this fall.
A massive inversion has existed between old crop and new crop prices, with new crop much lower than old crop values. As that inversion disappears, farmers are largely unwilling to lock in new crop values.
“Everybody wants last year’s prices, but they have to realize that what they’re being offered now (for new crop) is probably better than what they’ll get offered in a month or two,” said Doug Hilderman of NorAg Resources.
“Farmers are still thinking about last year’s prices, and those just aren’t obtainable any more.”
Crop conditions are good across Western Canada and the parts of the United States that grow barley, and the market is expecting a big crop to be harvested.
There are no major quality concerns. The only threat to barley is the potential for an early frost.
World prices for barley have dropped in recent weeks. Rain in Australia has improved prospects for the crop, which is in its early stages, while expectations are for good, big crops in Europe and the Black Sea region.
Cuthbert said world malting barley prices, backed off to Manitoba, equal $4.70 to $5 per bu. This means the offshore market won’t play a role in moving the crop if farmers don’t want to sell now to the domestic market for $5.50.
However, Cuthbert and Hilderman think farmers will eventually blink, needing to move the new crop and accepting whatever market reality appears as the crop goes into the bin.
It’s possible that something will damage barley or the underlying corn crop’s value, but the opposite is more likely: a big crop is harvested and knocks feedgrain values lower.
“We could see feed corn prices approach $4 a bu. and lower,” said Cuthbert.
“Farmers are seeing old crop feed (barley) bids of $5-plus, so it’s kind of hard to accept a new crop Manitoba (malting barley) bid for the same.”
