Don’t take low feed grain prices for granted.
That was the warning of Errol Anderson, grain analyst with Pro-Market Communications Inc., when he spoke to the Canadian Cattlemen’s Association here last week.
The Canadian Wheat Board’s initial price for feed barley and wheat has shocked many grain producers and possibly made livestock producers complacent.
But Anderson said the initials “mean nothing. They are just a starting point.”
The numbers were worked out before dry, scorching July-August weather limited North American yields. They are also set and guaranteed by the federal government and Ottawa wants to ensure they are low enough to avoid having to top up pool accounts in the event of a market crash.
Read Also
Saskatchewan dairy farm breeds international champion
A Saskatchewan bred cow made history at the 2025 World Dairy Expo in Madison, Wisconsin, when she was named grand champion in the five-year-old Holstein class.
“In all honesty, some bureaucrats have the fear of God in them not to put the pool into deficit.”
There are many more signals that feed grain prices could increase than move in the other direction, he said.
Many Canadian barley growers are going to have lower yields.
“He is only going to get 60-80 bushels an acre when he is used to 100 and he is going to be a reluctant seller. There is going to be a fierce battle between the feedlot and barley producer and I see the barley growers digging in.”
Internationally, Australia is facing drought caused by an El Nino. Spring seeded grains in China have experienced dry conditions and that means China may buy rather than export corn.
“That is going to give the Canadian Wheat Board some room and you’ll see Christmas presents in interim payments and that will force feedlots to (pay more).”
The U.S. is looking at a large corn crop, but not the bin busting size of last year. Chicago corn futures bottomed in July and rebounded on weather worries. Anderson thinks futures prices will trail off now that harvest has begun.
“But the U.S. is expecting record domestic use of corn. That’s coming from the livestock industry.”
Analysts are starting to focus on this domestic demand, but Anderson thinks the potential of China entering the market hasn’t made an impact.
“The word China – you get that one word in the commodity pit and these fund managers simply run to the pit. No one knows how much power they do or don’t have.”
With this potential volatility in the market, Anderson suggests feeders protect themselves. One strategy is to buy some deferred delivery barley. Another is to buy Chicago corn call options for March or April that cost 10-20 cents a bushel to lock in prices of $2.70-$2.80 a bushel.
“If they expire on you and you don’t get your money back, that’s tremendous news for you (cattle feeders) because it means that the whole North American feed complex has stayed down.
“But if China comes in, or if there are too many hogs and everything starts to go up, at least you’ve got some coverage and it won’t cost an arm and leg.”
