The prairie feedgrain market is glutted, but prices are high.
That’s a rare anomaly and a chance for farmers who need money to sell feed crops and hang on to non-feed crops with better price outlooks, say some advisers.
“If you want to generate cash and hold onto other products longer, we’re saying sell 50 percent (of your feedgrain crops) and hold onto the rest long term,” said Derek Squair, president of Agri-Trend Marketing.
“We’re saying hold on to most everything right now. Feedgrains are definitely the thing to sell. Hang on to the canola.”
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The Prairies are awash in feed wheat and barley, but unlike many years when that depresses prices as livestock feeders get picky, prices are high and staying strong.
That’s because of expectations for higher corn prices over the winter and higher export feed wheat and barley prices, advisers and brokers say.
“If you’re in Meadow Lake, Sask., the export market is way better than the domestic market. It has the potential to be a huge factor,” said Doug Chambers of Quality Grain, noting that this could be a huge boost to many farmers’ incomes.
“Last time we had a crop of feed wheat like we have out in Alberta, the price dropped about $2 a bushel in about two months. But today, it’s actually strengthening.”
Little export feedgrains are moving, so the high-priced export market is mostly just on paper, existing in Canadian Wheat Board Pool Return Outlook prices.
That’s encouraging farmers to hold back on dumping their larger-than-expected feed wheat stocks and to re-appraise the high quality feed barley that might make malting barley quality.
Squair said he recommends farmers move feed wheat first, feed peas second and feed barley last among the feeds.
Chambers said most elevators are plugged with peas and canola, so there isn’t much chance to deliver into the export market now, a market that will open up after Christmas.
“They aren’t taking any feedgrains,” said Chambers about Alberta grain elevators.
In a recent video commentary, CWB analyst Neil Townsend said world feed barley prices have hit a plateau after a rally sparked by the drought in the former Soviet Union.
He said unless there is a demand specifically for barley, as there is in Saudi Arabia, buyers have access to good supplies of feed wheat and other feeds.
“This has kind of capped somewhat the rise in world barley prices,” said Townsend.
Malting barley price increases overseas also have moderated because buyers seem to be scrimping and getting creative with their options, Townsend said.
“Big importers have seemed to manage without the overall quantity of barley but also by substituting lesser quality barley – particularly from sources like Australia – into their market,” said Townsend.
He said the barley harvest in South Australia, now underway, will be particularly relevant. Western Australia had too little rain and eastern states had too much rain and the opportunity for the best quality is in South Australia.
Squair said his company has been selling cash feedgrains for farmers who need money to pay bills, and also using CWB Producer Payment Options like the Fixed Price Contract to “pull cash forward.”
Thousands of farmers have been using canola as their first bill payer this season, but Squair thinks the oilseed’s positive outlook should make it the last thing to sell.
“Generate cash with everything but canola, basically,” said Squair.
