Canada Markets

Despite barley ending stocks forecast to rise by over 300% from year-ago levels to 2.5 mmt by July 31, according to Agriculture and Agri Food Canada, feed barley prices have appreciated 28% from the January low or can also be viewed as a 30% retracement of the $144/mt downtrend from the May 2013 high to the January 2014 low.

Despite the disappointing movement in the grain export sector, producers have been reluctant sellers of feed barley over the winter, while buyers have been reluctant to buy forward, with the bulk of trade taking place for delivery in a one- to two-week delivery period. Concerns exist over grain accessibility in the upcoming weeks during seeding, as well as the lack of available truck power to move supplies given the backlog of fertilizer movement on the prairies which can readily trump the movement of grains.

Traders report new crop Nov/Dec bids in the $185/mt range, in light of Statistics Canada's 10.9% cut to barley acres to 6.311 million acres from last year's 7.083 million acres, down from AAFC's March estimate of 7 million acres. Should this materialize, this would reflect only 50% of the 12.6 million acres seeded in 2000 as well as the lowest seeded acreage seen since 1965.

This contraction in acres comes at a time when China is viewed as increasing imports for food uses after a disappointing harvest in 2013 and a call for a 29% reduction in acres in 2014. The International Grains Council views this year's imports to be a record 2.7 mmt, which are only expected to fall slightly in 2014/15.

Despite this demand, China's demand for lower quality barley precludes Canadian supplies from making significant inroads into this market. Canada's total August through March exports were reported at 915,700 mt, down from the 1.072 mmt exports reported in the same period last year. In this report, China's year-to-date imports had increased 54,100 mt to 218,100 mt year to date from year-ago levels. One other significant gain in movement was a 122,400 mt volume shipped to unidentified countries, as opposed to no volume reported to such a destination the year prior. One disappointment would be a 64% tumble in barley sold to Japan this crop year.

Strong demand as a result of China's needs is also indicated in the CWB's latest Pool Return Outlook commentary for the 2014/15 crop year. In late March, Pool Return Outlooks for barley were increased $30/mt to $280/mt in store export terminals. Prairie maltsters have contracted new crop with producers in the $4.50 to $5/bu range.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

(ES)

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