Ending stocks are low and likely to go lower, but it’s not expected to push prices back to where they were in recent years
Western feedgrain prices are good by historical measures, but it might not feel that way after recent years, says Jim Beusekom of Market Place Commodities in Lethbridge.
“We got used to … some pretty lofty prices. Now we’re returning to some prices that are actually still higher than (they were) in 2019,” said Beusekom.
“We have to retrain ourselves on what is a good price.”
Read Also
USDA’s August corn yield estimates are bearish
The yield estimates for wheat and soybeans were neutral to bullish, but these were largely a sideshow when compared with corn.
Ending stocks for the 2023-24 crop year are very low. Statistics Canada is estimating 0.65 million tonnes, which is the second-lowest ever. For 2024-25, despite a crop of 8.5 million tonnes, stocks should fall further.
“Carry-out stocks are projected at 0.6 million tonnes, down from the previous year, and which, if realized, will be the second-lowest on record,” StatCan said July 22.
However, that won’t push prices back to where they were in recent years.
“The Lethbridge cash feed barley price is forecast at $290 per tonne, down $20 per tonne year over year and the lowest level in five years,” concludes StatCan. In 2022-23, the average was $417.
Beusekom said local barley supply and demand fundamentals are profoundly affected by geographically nearby corn supplies, and those right now look to grow into a mountain. Any time cattle feeders start seeing barley prices climb too much compared to corn, they’ll be tempted to bring in corn.
“Any more of a rally than we’ve had, corn just comes in,” said Beusekom.
Farmers’ price perceptions can be biased toward recent experience. In Western Canada, that has been affected by drought conditions in the western half of the Canadian Prairies and much of the western United States. Feedgrain supplies have been tight, and prices have hit levels most farmers wouldn’t have hoped for previously.
With U.S. corn expected to be plentiful this fall and winter, Canadian barley can only squeeze buyers so hard. And with a decent barley crop in the field today, barley itself won’t be hard to find, regardless of the projected ending stocks, Beusekom said.
“We’ll have plenty of barley around here,” he said.
To protect themselves, farmers need to shift their thinking from the drought-induced scarcity premium they’ve been able to collect. Assuming that buyers need to bid up prices to get barley won’t be a good bet this year.
“The biggest risk to our Canadian market is if farmers held their grain back from the market (if) they view prices as too low,” said Beusekom.
If farmers see their own yield potential declining because of the recent heat wave, they might get bullish on prices. That won’t be a good mindset if the U.S. corn crop keeps looking good.
If farmers don’t sell barley in the fall, “the corn rolls in; we don’t want that to happen.”
