As Western Canada gets drier, feed barley prices get firmer.
And they could move up further, grain brokers say.
“We could see another 25 cents a bushel upside,” said Greg Hagel of Quality Grain.
“We have a fair chunk of carryover, but it’s nowhere near what we’ll need for next year’s cattle on feed.”
Darren Frank of FarmLink Marketing Solutions was also mildly bullish.
“We’re fairly friendly to the feed-grains complex,” said Frank.
But both were waiting to see the corn acreage numbers in the June 30 U.S. Department of Agriculture report due out after the Western Producer deadline. If corn acres do not shrink as much as the market expects, corn prices could fall and limit barley’s upside.
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And both caution that barley – however poor production becomes on the Prairies this summer – can only go so high before it hits the corn ceiling.
“If we start seeing barley over $200 per tonne (delivered), we’ll start seeing corn come into Lethbridge,” said Hagel. “The feedlots will start booking corn, even if it’s $10 a tonne higher. At least that way they can get their needs covered.”
Alberta’s feedlot alley barley prices have risen steadily since production problems began in the western Prairies, offering better prices to producers for both old and new crop barley, moving up by about $30 per tonne or 20 percent.
Current fall delivered prices are about $190 per tonne, compared to $210-$215 for corn, Hagel said.
The U.S. corn crop still looks fairly large, regardless of spring problems in the eastern corn belt. And there’s a large carryover of corn stocks.
“The U.S. is in good shape,” he said.
South of the border
Frank said farmers hoping to sell barley in the fall need to avert their eyes from local growing conditions to realize that even widespread dryness in Alberta and Saskatchewan won’t provide the basis for a big feedgrains rally as long as U.S. crops keep looking large.
“If it stays where it’s at or improves, and we don’t get a reduction in acres (in the June 30 USDA report), that’s going to temper barley’s upside. We’ll just replace barley with corn,” said Frank,
If barley prices rise too high, it will kill demand from the feedlots, Hagel said. You can’t hold a buyer over a barrel if he can walk away.
“If they think it might be an issue in the fall, they’ll just meet their needs with corn,” said Hagel.
“They’ll book their needs out to December. Your bigger feedlots tend to do that. Rather than fight with the farmer to pry it (barley) out of the bin, they’ll just call the grain company and order in a train (of corn).”
If that demand is driven off for an extended period, barley prices could fall.
“It’ll set up a downside,” Hagel said.
Another wild card is demand from the livestock industry, which is suffering on both cattle and hog sides. It is unclear now whether bad prices for both and talk of major reductions in pig herds will result in less demand for feedgrains.
“Consumers may just be switching to other meats, so I don’t think that will have a huge impact on feedgrains,” said Hagel.
In its June 12 Feed Outlook, the USDA’s Economic Research Service predicted slightly lower demand from a shrinking livestock industry and a slightly reduced U.S. feedgrain crop in 2009-10.
It also predicted slightly lower world feedgrain production, although it noted significantly reduced barley production prospects in the European Union and Canada due to dryness. However, barley prospects have improved in Russia and parts of North Africa.
