Boring old barley is an exciting crop this year for one big reason.
“Overall, everywhere, barley is tightening up,” said Canadian Wheat Board barley market analyst Neil Townsend.
Prices for feed and malting barley have been strong so far this year and that appears to be almost certain to continue for a few months.
Last week barley buyers heard the bad news for them that production problems in Ukraine were going to choke off barley exports until the end of September.
The Ukrainian government has put a “prohibitive quota” on barley exports to ensure the country does not run short of feed grains for its livestock, like it did a few years ago.
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Barley exports from Russia are also expected to dry up this summer, its government announced, because its livestock industry has been growing and will likely consume all that Russian farmers can produce this summer.
These developments in the Black Sea region have scared buyers and neutralized the effect of recovering barley production in Australia.
“I anticipate pretty strong barley prices being maintained until at least the first of December, when a very large crop of Australian barley will come to market,” said Townsend.
World barley production is increasing this year regardless of problems in the former Soviet Union. But that hasn’t hurt barley prices, because use is increasing even faster, leaving stocks lower than last year.
The Australian Bureau of Agricultural and Resource Economics, in a June crop market price forecast, said ethanol production and livestock production are behind the surge in demand and the strength in prices.
The malting barley market has remained strong as well, and even though feed and ethanol use have expanded faster than brewer consumption, the spread between feed and malting barley has remained fairly steady.
That is likely to remain the case unless one market becomes drastically over- or undersupplied.
“If the feed barley market’s high, the malt barley market’s going to be high, too,” said Tim McKay, the manager of Rugby Farmers Union Elevator in Rugby, N.D.
McKay said malting barley now has about a 45 cent US per bushel premium to feed barley, with offered prices of $3.70 per bu. for malting and $3.25 for feed, which is as normal as it gets.
In years when there is little feed quality barley produced, prices can rise to almost malting levels, he said. In years when there is almost no malting, its premium can expand to $1.50 per bu.
Townsend said nothing in the world crop situation has alleviated supply fears of barley buyers, so prices are staying strong. European Union barley prospects looked good earlier in the year, but the crop is now under stress as farmers prepare for harvest.
For now, the market looks good from a barley grower’s pricing perspective, Townsend said.
But feed prices might suffer later this year.
“It’s going to be very hard long term to sustain these kinds of feed values,” said Townsend.
“So much of it is dependent on the production capacity of the Black Sea region and the buying capacity of Saudi Arabia (the world’s biggest buyer).
“When Australia harvests (at the end of 2007), that’s when we’re really going to have to look.”
