Barley growers shouldn’t expect to see better prices germinating in international malting barley markets through the remainder of 2009-10.
An excellent quality malting barley harvest in the European Union, along with the likelihood of a decent crop in Australia and sizable global carry-in stocks, are combining to keep a lid on price prospects.
That’s no surprise to producers who follow the Canadian Wheat Board’s Pool Return Outlooks.
The latest 2009-10 PRO for select CW two-row is $224 a tonne (less freight and handling charges), down from $245 a tonne the previous month and $314 for 2008-09.
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For select CW six-row, the PRO is $206 a tonne, down from $225 the previous month and $294 for 2008-09.
Bob Cuthbert, in charge of malting barley sales for the CWB, said the major factor bearing down on the market is the situation in Europe.
“Even though their crop is slightly smaller, down by six million tonnes to about 60 million, it’s very good quality,” he said.
“France, the U.K., Scandinavia and even Germany all had very good quality and so they have a substantial exportable surplus that’s been weighing on the market.”
France is expected to produce a record 12.6 million tonne barley crop, with 71 percent of the spring crop achieving malting quality.
As a result, European malting values have dipped to near feed equivalent levels of $150 to $160 a tonne.
The market is also being affected by plugged malt barley pipelines in North America.
With all the uncertainty about the outcome of this year’s crop, domestic maltsters bought a lot of old crop supplies, which will defer demand for new crop and limit price prospects.
In addition, some of the record CWB sales to the United States are still arriving in that country.
So where should producers look for a glimmer of good news?
“I guess the only thing really is to give it time,” said Greg Kostal of Kostal Ag Consulting of Winnipeg. “Time is the best remedy.”
Less next year
European barley acres will likely drop next year, perhaps by as much as 20 to 30 percent, due to this year’s low returns, which could go a long way toward turning things around.
In the shorter term, one potential positive signal comes from China. Production there is down by 35 percent, said Cuthbert, and there is talk it could enter the market for 400,000 additional tonnes.
However, he cautioned that competition for new Chinese business will be tough between Canada, the EU and Australia.
Cuthbert said the PRO values are higher than current market values because of early season sales at higher values.
He said the board won’t come close to matching last year’s 2.7 million tonne malting barley export program. It will likely sell two million tonnes this year.
Kostal said the 2009-10 PROs are well below 2008-09, but historically they’re not that bad. In nominal dollars they are the fifth highest in the past 22 years.
“That’s not adjusted for inflation and of course input costs are higher, but historically these numbers are pretty reasonable,” he said, adding prices always look worse when they’re going down.
He expects producers with a decent yields and good quality should be able to pencil in a profit on their 2009-10 malting barley.
