Barley growers waiting for that big spring rally might be waiting
forever, analysts say.
Falling demand from feedlots and improving moisture conditions are
choking a barley market many producers thought would be laying them
golden eggs by now.
“The smart farmer was the guy who sold last November, because the
chances of us seeing higher prices than November are slim,” said Doug
Chambers of Grainplace, a grain brokerage company.
“You might as well have had the money and kept the banker happy for the
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last three months.”
Chambers said this will probably be the first year in a long time
without a significant spring rally.
Errol Anderson of ProMarket Communications said producers shouldn’t
expect more than a 10-15 cents per bushel spring rally, and that will
be for small sales only. The feedlots aren’t screaming for barley. Last
summer’s drought put pressure on the feedlots, but it hasn’t been
enough to buy barley at any price.
“The grower always thinks they can hold the feeder to ransom,” said
Anderson.
“That’s the psychological problem.”
Many producers held onto barley throughout the winter because they
thought as time wore on feedlots would become more desperate and pay
higher prices.
Prices did dramatically rise, but that made feedlots look south to
American corn supplies, which have been flowing into southern Alberta
at record rates.
That isn’t going to change during the spring, Anderson said, because
the big feedlots don’t buy hand to mouth.
“They’ve booked (feed grains) right up to the summer,” said Anderson.
That leaves farmers hanging onto lots of barley while a new crop is
being planted and grown.
“I think there’s going to be more barley left over this year than last
year,” said Anderson, disagreeing with Statistics Canada’s projection
of low barley carryover.
Chambers said farmers are having trouble finding feedlots to buy their
barley.
“You’ve got to make 10 phone calls to find somebody who will take three
loads of barley.”
Manitoba feed wheat markets are also weak now, Chambers said.
Low-vomitoxin wheat has dropped from about $160 delivered, to a maximum
of $150 recently.
The Winnipeg Commodity Exchange’s feed wheat and barley futures markets
are also weak.
“The feed grains market is just really lacking demand here,” said
Gerald Klassen of Fimat Derivatives Canada.
Recent precipitation has reduced worries about new-crop barley.
Feedlots are running at about 60 percent capacity.
That has removed the risk premium that barley was enjoying, and the
supplies still on farm are weighing on the price.
Domenic Bellisario of Benson Quinn-GMS said more selling pressure has
also undermined prices. Louis Dreyfus sold actively, which prompted
others to sell before the price dropped further.
“It’s kind of tumbled over each other and prices have fallen over the
last few sessions,” said Bellisario.
Klassen said that doesn’t leave a good outlook for the farmer still
holding barley or feed wheat.
“The longer the farmer holds onto this barley, the more negative it
becomes,” said Klassen.
