With feed wheat inventories being slowly drawn down and with a smaller barley crop expected, feed prices could rise in the coming months.
Analysts say supplies of feed wheat and barley should tighten in 2006-07, assuming seeding forecasts hold true and a normal quality crop is grown.
“With less feed wheat and less feed barley, values may have to increase to ensure a steady supply,” said a recent commodities market report from Saskatchewan Wheat Pool.
An expected tightening of corn supplies in the United States caused by strong exports and increased ethanol and feed demand would also support feed prices in Western Canada.
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Market analyst Mike Jubinville of ProFarmer Canada said Western Canada is on the verge of a higher price cycle, noting that for the last two years feed grain prices have languished near the bottom of the 20-year trading range.
“We’re not going to have a massive rally in feed barley, unless there is some significant threat to new crop production,” he said.
“But I do expect a slow, grinding process leading to higher prices.”
Errol Anderson of ProMarket Commodities agreed, saying feed wheat and feed barley prices will start climbing soon.
“If there is normal weather in 2006, we’re set to tighten up feed wheat stocks across the Prairies into 2006-07,” he said. “I think we can look forward to a price increase, with the worst case scenario staying flat.”
Feed wheat delivered to mills has been fetching around $95 to $115 a tonne in Alberta, but has been as high as $130 a tonne in feed-deficit Manitoba, which imported feed wheat from eastern Saskatchewan all winter.
A barley price rise will be slower because feedlots are well supplied, but will also eventually climb as the smaller crop affects the market.
Agriculture Canada projects a 10 percent decline in barley production in 2006, to 11.3 million tonnes. Total supply is expected to be 11 percent lower at 14.2 million tonnes.
Joe Wang, the department’s coarse grains analyst, said the reduced tonnage, combined with strong domestic demand, should result in an average price of about $130 a tonne in-store Lethbridge, up 18 percent from a projected average of $110 in 2005-06.
There are no solid statistics on the amount of feed wheat held by prairie farmers, but the Canadian Wheat Board says a significant volume will be carried into the new crop year.
CWB spokesperson Maureen Fitzhenry said that given the current low Pool Return Outlook of $117 a tonne and limited delivery opportunities, some farmers may opt to keep supplies to blend it with a higher quality 2006 crop.
“We do have some sales opportunities, but farmers are simply not interested in delivering at the price available in the export markets,” she said, noting that the latest guaranteed delivery contract, the fifth of the year, has attracted only a few hundred tonnes.
The export market for feed wheat is extremely competitive, she said, and the strong Canadian dollar makes it even tougher to obtain a good return for prairie farmers.
Feed wheat has been at a discount to barley during the past 18 months. Jubinville expects that will change by the fall, with feed wheat climbing to its usual $10 to $15 premium.
