It can happen if you just believe

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Published: October 2, 2015

It can happen if you just believe

Barley growers appear to believe two things:

  • Western Canada is harvesting a small feed crop this year.
  • Prices have to go up.

Their belief in a small crop might cause prices to rise, says one Alberta feedgrains broker, even though reality might be different.

“It almost matters as much (as supply and demand), what the farmers’ mentality is,” said Jared Seitz of Agfinity in Spruce Grove, Alta.

“They almost make it happen just by believing. If they all jump on the same bandwagon and they truly believe that prices will go higher, that’s usually what we see.”

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The western Canadian feedgrains market has been buffeted by conflicting notions of what manner of crop will be harvested this year.

The early season drought in the western Prairies created the widespread belief that the regional feedgrain supply would be severely reduced, driving prices higher.

Then reports from the harvest suggested many farmers in drought areas were harvesting near-normal crops, confounding expectations.

Combined with ample supplies of U.S. corn, the apparently improving crop situation in Western Canada should put downward pressure on prices.

However, much crop is still unharvested, and reports continue to be mixed about the true state of supplies.

The recent model-based Canadian Crop Condition Assessment Program forecast of the barley crop pegged production at slightly more than seven million tonnes, the smallest production since the 1960s. But the split between the amount that will be malting grade and how much will be feed won’t be known for weeks. Also, there is a chance weather could downgrade other crops to feed.

Seitz said what farmers believe, and that’s because many farmers have shut the bin doors.

Because they believe feedgrain supplies are tight, they aren’t likely to sell or move grain until prices reflect their version of reality.

“Most of them are confident that we’re going to see $5 (per bushel) barley again and higher numbers on wheat,” said Seitz.

He has found little supply and demand justification for that view but has also witnessed farmer grain delivery “strikes” that have rattled buyers.

“It’s something we’ve seen for a few years.”

Buyers are “starting to feel a little exposed,” so farmer obstinacy is already becoming a factor.

“Even though overall demand is down, they want to have some on the books,” said Seitz about cattle feeders.

The biggest wild card is the wheat harvest, which was hit by a combination of weather factors.

The impact on quality is hard to assess until the crop has been harvested. Damaged wheat often ends up in the feed market, and no one know how much of that there will be until the grain is in the bin and samples have been graded.

“A lot of it comes down to wheat and how much will be available,” said Ken Ball of P.I. Financial.

Seitz said farmers don’t seem willing to sell barley at today’s prices and might hang on to force higher prices later in the crop year. If they all hang on together, they might be able to pull it off.

“It’s funny how farmers are a band of brothers that way,” said Seitz.

Contact ed.white@producer.com

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Ed White

Ed White

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