The Statistics Canada Dec. 31 stocks report released on Feb. 5 could prove a test for the barley market. Stocks of barley were reported at 4.938 million metric tons, down 18.2% from the previous December and well below the five-year average of close to 6.1 mmt and the 10-year average for this date at 6.3 mmt.
In the January through July 2018 period, Statistics Canada data infers disappearance of 4.790 mmt (December stocks estimated at 6.033 mmt vs ending stocks at 1.244 mmt), while the five-year average disappearance over this seven month period is calculated at 4.5 mmt. Given this historic usage, ending stocks could be set to plunge to very tight levels, or there may be far more barley available than the reported volumes based on Statistics Canada's producer surveys.
The attached chart shows the trend in ending stocks since year 2000 (blue bars measure against the primary vertical axis), while the red bar represents the January Agriculture and Agri-Food Canada estimate of 1 mmt, a volume that could face downward revision in the February release of Canada: Outlook for Principal Field Crops report.
The brown line with markers represents the average crop-year Lethbridge price reported by AAFC. As seen on this chart, AAFC reports an average crop year price of $279/metric ton in 2012/13, the last time that ending stocks fell below 1 mmt, or to a level of 983,400 mt. This compares to the current 2018-19 forecast range from of $240 to $270/mt, of which the midpoint of $255/mt was chosen for the purpose of this chart.
While the flow of U.S. corn may help temper this price move, a lower Canadian dollar trade as seen over the last week not only makes Canadian barley prices more attractive in export markets, but also makes U.S. corn imports more expensive, potentially allowing for further upside potential for domestic barley prices.
Recent trades reported by brokers for the balance of the crop year point to prices in the upper end of the AAFC range of $240 to $270, while the accuracy of Statistics Canada estimates will be well tested as we move closer to the end of the crop year and new-crop availability.
Cliff Jamieson can be reached at email@example.com
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