No farmer likes high fertilizer prices.
But the rising cost of nitrogen may contain a nugget of good news for farmers who grow barley, say grain market analysts.
High fertilizer costs may prompt farmers in the United States to grow soybeans rather than nitrogen-hungry corn.
Meanwhile, those who do stick with corn may decide to cut back on fertilizer to save a few dollars, thus reducing yields and production.
Anything that results in less U.S. corn being produced is good news for world feed grain prices.
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“If we see a drop in corn numbers, that could help support feed values to some degree,” said Dwayne Lee, market analyst with the Canadian Wheat Board.
Charlie Pearson, who watches the markets for Alberta Agriculture, said it’s much too early to make plans based on a possible drop in U.S. corn, but he agreed it could work to the benefit of barley growers.
“Those are stories that are going to have to play themselves out over the next three months, but they are a couple of things that add on the optimism,” Pearson said, adding he expects to see a “relatively strong” feed barley market in the coming year.
Barley acreage is expected to increase by about six percent in 2001, as prairie farmers respond to relatively strong prices and favorable marketing opportunities.
Based on average yields, Agriculture Canada is forecasting production of 14.9 million tonnes, up from 13.5 million tonnes in 2000. Total supplies will be 17.9 million tonnes, up from16.6 million.
On the demand side, the department says domestic consumption will increase due to rising livestock numbers, while exports of feed barley should also increase, reflecting higher production and stronger world prices.
Carryout stocks at the end of 2001-02 are forecast to be 3.3 million tonnes, up from 2.9 million a year earlier.
As for prices, Ag Canada is projecting off-board feed barley to be in the range of $110 to $140 a tonne (in-store Lethbridge) for a mid-range of $125, up slightly from the current year.
The export price from the CWB is also forecast to increase by about $5 a tonne to $148 a tonne (in-store export position) for No. 1 CW feed.
Pearson agrees with Ag Canada that acreage will rise as farmers respond to strong domestic feed markets and a good outlook for malting barley.
However, he does have concerns that a significant increase in acres could lead to excess supplies of feed barley on the market next year.
He said farmers budgeting for the coming year should probably pencil in prices about 25 to 30 cents a bushel below current levels.
“It’s a year for some discipline,” he said, adding he’d encourage farmers to forward price some of their 2001 production for risk management reasons.
While there are lots of reasons to be optimistic about the year ahead, it’s easy to be wrong on feed grains, said Pearson.
“If we get good crops here and the U.S., and if we don’t get corn acres down as much as people think, there is room to slide. Farmers should be alert during the next few months for a chance to lock in the price.”
Lee said weather and crop conditions in southern Alberta will also be crucial as the year progresses.
“It’s pretty dry there again, so depending on how the summer goes and the crop develops, domestic demand could be fairly strong,” he said.
In the world market, intervention prices in the European Union are set to drop July 1, which should lower prices there.
The world barley price will also be affected by the value of the Euro and whether the EU applies export subsidies to barley.
