Feed barley prices in Western Canada continue under pressure as buyers respond to the growing available supplies and reports of significant yields across the Prairies. To gain perspective, Manitoba Agriculture reported yields ranging from 60 to 140 bushels per acre as of their Sept. 16 crop report, while the province's five-year average is 59.2 bpa. Saskatchewan recently indicated a range of 62 to 69 bpa across the six crop regions of the province, where the five-year average is 53.4 bpa. While Alberta Agriculture has not recently announced yield estimates, the overall barley crop was last rated at 88.3% good to Excellent, while the five-year average yield is 63.8 bpa.
Despite an estimated 4.6% drop in planted acres according to Statistics Canada, overall supplies are expected to grow 6.2% to 9.8 million metric tonnes in 2013/14. According to Agriculture and Agri Food Canada's latest supply and demand tables, ending stocks are estimated to swell 50% to 1.2 mmt, which remains significantly below the five-year average of 1.95 mmt and the 10-year average at 2.15 mmt.
Barley prices will continue to feel the pressure from the U.S. corn market, with a potential record crop around the corner. At the same time, there is little chance of U.S. corn displacing barley in western markets given current markets. Using a traditional 80-cent-over basis, landed corn would cost approximately $216/mt landed southern Alberta, with truck freight, off-loading costs and margin to be added. This far exceeds the current $180/mt barley market.
Trade may remain hand-to-mouth for some time as buyers show little interest in looking a future months. Sellers may have to be poised to make decisions on nearby sales or risk holding for some time. While there remains no official data surrounding wheat quality on the prairies, feed buyers may show keen interest in lower protein wheat supplies, which may tend to add further supplies to the pool of grain seeking homes in feed markets and may weigh on barley markets.
The CWB's latest Pool Return for malting barley remained constant at $300/mt, citing early sales to China as the supportive feature in that market. August import data from China indicates 186,747 mt imported in August, which is down 17.86% from August 2012. Of this volume, Australia supplied 95% while Canada supplied the balance. Given the CWB's comments, we should expect a change in this balance of supply in upcoming months while it's uncertain how long PROs will hold at current levels.
One additional negative sign for barley is seen in the trade of malt barley on the NYSE Paris Liffe exchange in Europe, where nearby November futures hit a contract low of 195 Euros in last week's trade, after trading as high as 272 Euros in November 2012. This market remains technically oversold while momentum indicators show no sign of turning higher. Competition in global malt markets from Canada, U.S, Ukraine, the European Union and Australia may continue to add pressure to this market throughout the year.
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Cliff Jamieson can be reached at firstname.lastname@example.org
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