Canada Markets

Bids for barley delivered into southern Alberta have rebounded from their late January weekly low of $153 per metric tonne to $170/mt in the current week. This move on the chart is similar in nature to the bounce seen in the corn market after reaching a $4.06 1/4 low on the week of Jan. 6, two weeks prior to the move in barley.

There is no shortage of barley. In fact, the estimated carryout for 2013/14 as suggested by Agriculture and Agri-Food Canada is 2.4 million metric tonnes, up from Statistics Canada's carryout of 983,400 reported for 2012/13. This is the highest carryout seen since the 2009/10 crop year when 2.502 mmt were carried out.

The high carryout stocks are perhaps confirmed when one considers the Statistics Canada Dec. 31 stocks report which suggested stocks in all positions of 6.695 mmt, the largest Dec. 31 stocks seen since December 2009. The projected carryout of 2.4 mmt represents a draw-down in stocks or demand of 4.295 mmt, which is consistent with the December through July demand experienced in the past two years of 4.282 mmt (2012/13) and 4.286 mmt (2011/12).

Other similarities to the 2009/10 crop year are the ending stocks as a percentage of overall demand (stocks/use), which is calculated at 27.7% based on this year's current projections, as compared to 24.9% in the 2009/10 crop year.

So how did prices react in the 2009/10 crop year? Feed prices delivered to Lethbridge, with data made available from October on, indicate that prices ranged in the $140 to $150 range approximately 33% of the time, $150 to $160/mt range approximately 54% of the time and in the $160's just 5% of the time, based on weekly closes.

One would think that with the slow movement by rail, and the lack of opportunity to deliver almost anything into the elevator system, that producers would capitalize on potential barley sales as a means of generating cash flow, although this is not the case at the current time as grain remains in strong hands. Of course, the best opportunities present themselves in April and May when producers are preoccupied with seeding while also facing road restrictions and wet yards, with very few have the trucks and/or the manpower to move grain into the market at this time.

Longer term, the USDA is calling for a large corn carryout of 1.481 billion bushels this crop year and an even larger 2.1 bb for next crop year, a bearish projection which will undoubtedly weigh on the feed market. At the same time, it is early days and adjustments to current targets are inevitable.

Cliff Jamieson can be reached at cliff.jaimeson@dtn.com

(ES)

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