This time last year barley prices delivered Lethbridge reached their seasonal high based on the upper end of the weekly range reported by Alberta Agriculture at $270/mt, while dipping to a low of $242/mt by mid-July. The May 29, 2018 Alberta Crop Report pointed to continued hot dry weather with seeding nearing an end, crops reported at normal growth stages and cooler weather and showers in the forecast. The June 5 report, one week later, points to "decent rains" over almost all agriculture areas of the province.
This year could be different. An Alberta broker has reported Lethbridge cash trading at $285/mt on May 30, climbing by $10/mt per week for the second straight week as shown by the blue line on the attached chart.
Canada's barley stocks could be on the way to a record low. AAFC has used an estimate of 900,000 metric tons remaining as of July 31, down from Statistics Canada's 1.244 mmt estimated for 2017-18. The May supply and demand tables included an upward revision of 250,000 mt in exports for the current crop year to 2.950 million metric tons. In order to accommodate a higher export forecast, government data fiddled with domestic demand in order to leave the 2018-19 carryout unchanged at 900,000 mt, close to the 983,000 mt record low reported by Statistics Canada for 2012/13. This summer could prove a test as buyers try to coax grain out of bins.
This level of stocks would reflect a stocks/use ratio of 10.3% based on current AAFC estimates, down from 26% in just two years and possibly the tightest on record.
Unlike the favorable turn in weather realized this time last year, the seven-day forecast continues to point to dry conditions on the Prairies, while DTN's five-day highs compared to normal points to temperatures ranging as high as 6 C to 9 C above normal through June 4 across the western Prairies, which will heighten concerns. Crop emergence and pasture conditions on the Prairies remain at the center of the radar for industry watchers.
Another bullish factor for the barley market is the sharp rally in corn prices due to the ongoing wet conditions that have led to the slowest planting pace on record, making feed corn landed on Southern Alberta more expensive. Over the past three weeks, the nearby July corn contract has climbed 75 1/4 cents to $4.27/bu, moving from a low of $3.43/bu on May 13. Corn imports into Canada are also growing increasingly expensive due to Canadian dollar weakness, with the spot loonie down close to 50 basis points this week, the weakest trade seen since the first week of January and at $.7395 CAD/USD, compares to the $.7718 CAD/USD reported on this day of 2018.
Weather remains key. One general rain on the Prairies may cool Prairie feed markets, as will dry conditions over the U.S. Midwest that allow for planting progress.
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Cliff Jamieson can be reached at email@example.com
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