Winnipeg feed barley futures climbed a little last week after months of weakness.
The reason was a rally in Chicago corn, which rose despite a United States Department of Agriculture report that cut the demand outlook and raised expected year-end stocks.
But the bad news was more than offset by a report from Informa Economics Dec. 12 that forecast American farmers would seed less corn this coming spring, down 4.2 percent or 3.6 million acres.
The price relationship between corn and soybeans has meant the oilseed produces a better return per acre than corn, so unless corn prices rise, farmers will favour soybeans next spring.
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China purchased just over 20 million tonnes of wheat, corn, barley and sorghum last year, that is well below the 60 million tonnes purchased in 2021-22.
Also, all commodity and equity markets were stronger late last week.
Grain prices at American grain exchanges were also supported by the weaker American dollar, which fell to a two-month low against the euro. A weaker U.S. dollar makes American grain cheaper for foreign buyers, raising the prospect of stronger exports.
Although financial problems in the U.S. kicked off the world economic slide, the greenback initially rose through the autumn as investors got out of falling equities around the world and parked their money in what were seen to be safe American treasury bills.
But continuing economic woes in the U.S. now has investors worried about being overexposed to the U.S. dollar, so they are moving money and weakening the greenback.
Another factor in corn’s rally last week was stronger oil prices sparked by expectations that the Organization of Petroleum Exporting Countries would agree to a larger production cut to keep up with falling consumption.
These factors continued to support grain prices early this week, but in the longer term, the weak demand signaled in the USDA report might again dominate the market’s psychology.
In the marketing year to date, U.S. corn exports are running at a slower pace than necessary to meet the USDA’s export forecast. They will have to pick up a lot in 2009.
For that to happen, U.S. farmers will have to capitulate, readjust their price expectations and start delivering.
That could pressure corn lower again, and by extension, barley.
