Grain market watchers believe the recent reopening of the U.S. border to live cattle will have little effect on feed barley prices.
“I don’t think it’s going to affect it as much as everybody thinks it’s going to,” said Larry Weber of Weber Commodities in Saskatoon. He said barley has dropped 15 cents per bushel since the border reopened.
There has been speculation that as a result of the border reopening to live cattle, animals would go south for feeding and reduce the demand for Canadian barley.
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But most observers believe the border opening will have little or no impact on Canadian barley.
There are several factors at work in the market: a hefty carryover of barley into the new crop year; a large, good quality crop nearing harvest; and an improved domestic beef market that makes it more favourable to finish and slaughter cattle in Canada, rather than ship them south for feeding.
Jim Beusekom of Newco Commodities, located in “feedlot alley” near Lethbridge, doesn’t see the border opening as having any short-term effect on barley markets, because feeder cattle don’t appear to be leaving.
“Right now, we’ve got a situation where our feed grains on the Prairies are cheaper than what U.S. commodities are. I would suspect their cost of feeding is going up, whereas our feed commodity prices are going down right now,” he said, adding that if it’s cheaper for cattle buyers to feed their cattle in Canada, they’ll stay here.
“There might be some feeder cattle going south to prove a point, but a mass exodus on cattle going south probably won’t happen if our buyers in Western Canada are more competitive than the U.S. guys, because everyone has to account for their feed when they’re figuring out their margins.”
Beusekom said more cattle may cross the border in October or November when they come off pasture, but he said,”the chances are probably quite slim.”
Charlie Pearson, provincial crops analyst with Alberta Agriculture, agreed that great numbers of cattle won’t be leaving any time soon. “There’s a whole bunch of things that say we’re not likely to have a stampede,” Pearson said, referring to increased paperwork and costs to ship south, as well as a lack of infrastructure to transport the animals, a situation that is a result of the border being closed for over two years.
“We have developed increased processing capacity in Western Canada and for animals that are fed here, there are more opportunities to slaughter them and add value here, so maintaining the herd here for longer and feeding them out will be a positive.”
Like other analysts, Pearson said a system of checks and balances will keep the barley supply fairly even.
While last year there was an abundance of feed wheat to compete with barley and thus cause a larger barley carryover to the new crop year, the potential for a better quality barley crop this year could cause feed barley volumes to drop.
“If we have better access to the malt barley market and a good quality crop, then that’ll reduce some of the feed barley supplies, potentially,” Pearson said.
He also noted that barley acres harvested as silage this year will likely be up, causing less barley to be combined as feed grain. On the other hand, yields might be up, helping to maintain the feed barley supply.
Errol Anderson of Pro-Market Communications in Calgary, said barley markets may soften at harvest.
“Right now what’s occurring is growers are having to clear out for bin space, and there could be a lot of barley put on the ground, and the feedlots know that. So there’s going to be a lot of barley coming right off the combine, and the market between now and probably late September is going to really be grinding. Probably the earliest that we would see recovery in barley is November.”
The Agriculture Canada grains and oilseeds June 28 outlook forecasted that barley production would decrease by seven percent this year due to lower seeded area and yields. However the total supply is projected to increase due to the high carryover of low quality barley from 2004-05.
It also forecasted barley exports would rise by as much as 25 percent due to greater volumes of malting quality barley being produced and less competition in overseas feed markets.
The Canadian Wheat Board said in its pool return outlook of July 28 that an excellent, albeit short-term opportunity exists for feed barley exports from Western Canada due to little export competition from Europe and the Black Sea region, as well as lower ocean freight costs. But when the Australian supply hits the market late this fall, world prices are expected to drop significantly. In the July PRO, the feed barley A pool increased to $129 per tonne, up from $118 in June.
New crop malting barley prices are down from last year. The board said continued beneficial rain in Australia might push the price outlook slightly lower. The special select two-row barley PRO is $173 per tonne, down by $5 per tonne from 2004-05.
As of July 1, 2005, 804,294 cattle were on feed in Alberta and Saskatchewan, compared to 680,729 at the same time in 2004, and 765,449 in 2003.
