Prairie feed grain prices are leaping and stumbling their way through a
weather market, analysts say.
Weather has driven feed grain futures prices up, and is also
responsible for the sudden drops of the past few weeks.
“Western Canada has become an island unto itself in the world,” said
Mike Jubinville of Pro Farmer Canada in Winnipeg.
“There’s nowhere in the world where barley is trading as high as it is
here.”
Continuing drought in many barley-growing areas has spooked some
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buyers, but reports of farmers switching to barley from wheat have also
affected the market, leading to volatile prices.
The October Winnipeg barley contract traded as high as $149.80 per
tonne last week but on June 3 the price closed at $143.20 after rain in
southern Saskatchewan.
“We’re in a weather market now, so exaggerations are the name of the
game,” Jubinville said.
Doug Chambers of grain broker Grain Place said he thinks the market
overreacted to reports of small barley acreage this spring.
“The market was extremely overanxious.”
Crop conditions may look poor now, but that could change fast.
“One rain going through any time between now and the 15th of June and
the whole world becomes barley,” Chambers said.
Jubinville said the high barley prices can’t be justified. Southern
Alberta’s net return for new-crop barley sold through the Canadian
Wheat Board is estimated to be $1.88 a bushel, but it is selling to
local users for $3.
“Feed barley to me is overvalued. If you price it relative to what it
costs to import U.S. corn, barley’s too expensive.”
Chambers said May rallies are common because supplies are usually
tight. But the strength of this rally will be hard to maintain. At the
end of June, when the state of the crop is more evident, signs of a
small crop would justify today’s high prices.
Ken Ball of Benson Quinn GMS said much of the rally can be attributed
to futures prices scrambling to get back in step with Alberta cash
prices.
“Cash barley prices just seemed never to follow the futures downwards.”
Feed wheat prices have followed the trend.
Ball said feed grain growers may be pleased to see such high prices,
but they are hurting livestock producers already facing weak prices
from packers.
“The hog industry is in pretty bad trouble,” he said. “The whole
livestock industry is getting shaky.”
While a weather market may be good for prices, it reflects poor
production prospects for prairie crops, Ball said. Terrible spring
weather combined with the potentially damaging U.S. farm bill have cast
a pall over Canadian farmers’ spring.
“The combination of the weather and the U.S. farm bill is kind of like
getting punched in the stomach, then kneed in the face as you go down,”
Ball said.
