Warm winter weather has been wonderful for cattle feeders, but woeful for grain farmers with barley in the bin.
Mild temperatures have meant great feed conversion rates in southern Alberta feedlots, but have melted feed barley prices since the fall.
In the past month, nearby futures prices have slipped $5 to $7 per tonne, said Brenda Brindle, of Kenagra Management Services in Edmonton.
Basis levels – the difference between futures and cash prices – are also becoming generally wider.
“We’re just kind of bleeding to death here, very slowly,” said Ian Morrison, market strategist with Alberta Wheat Pool.
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Feedlots finished cattle three to four weeks earlier than they would have if temperatures had spent some time around -30 C, said Charlie Pearson of Growers Marketing Services.
He said feedlots can’t find enough reasonably priced replacements, another blow to demand.
Farmers grew less barley last summer compared to the record crop of 1996. But they were saddled with a big crop carry-in, said Pearson, meaning supplies are ample.
Compared to dismal export prices reported through the Canadian Wheat Board’s pool return outlook for barley, domestic prices this fall looked pretty good, said Pearson.
“The wheat board price is so low that they’re not really even part of people’s marketing plans, I don’t think,” said Morrison. “That leaves a lot of barley chasing our domestic market.”
Saudi Arabia, the world’s largest feed barley importer, hasn’t been in the market since mid-September, explained Rhea Yates of the Canadian Wheat Board.
And some countries that don’t usually export feed barley are putting it up for sale, adding to world supplies.
In September, farmgate values for export barley were between $2.20 and $2.60 per bushel. By January, they had dropped to between $1.80 and $2.20 per bu.
Because of low board prices, Saskatchewan and Manitoba farmers have moved a lot more barley than usual into Alberta feedlots, said Morrison.
“There’s been so much out-of-province grain that the Lethbridge basis has not really narrowed in much since fall,” he said.
However, analysts say mercurial Mother Nature holds the only hope in sight for the feed barley market.
“I think the only thing that would bail out the barley market is if we have a drought or a drought scare,” said Morrison.
Brindle thinks barley prices could slip a bit more, then move sideways into the spring.
What happens in the U.S. corn market will play a role in barley prices, along with weather scares, she said.
And the wheat board’s first price estimate for the new crop, to be released March 2, could also cause some movement.
“If they come out with something very low, then the market may look at that as an indication for export values for the coming year,” said Brindle.
A dismal export outlook could lead the market to expect farmers to stick to the domestic market again. But low prices could also turn farmers off planting the crop this spring.
“If we plunge too much, then we’ll see a pull-back in barley acres, and then that starts to pull the market around again,” said Brindle.
