Canada Markets

What's to Come for Feed Barley in the West?

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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This week's feed barley trade could see prices rise above the 2014 high of $218/mt delivered to southern Alberta, while the 50% retracement of the June 2013 high to the January 2014 low is found just above at $224.50/mt. A breach of this could lead to a further move higher into the $240/mt area. (DTN graphic by Nick Scalise)

Prairie barley producers may find interest in the next two crop reports to be released by Statistics Canada. On April 23, the principal field crop areas report will be released, providing a look at producers' seeding intentions as of March 31. Following that report is a May 6 release of the stocks of principal field crops in Canada, with estimated stocks as of March 31 to be reported.

Despite U.S. corn prices continuing to grind lower, feed barley prices are pushing higher as the crop's fundamentals influence market price. In 2014, Canada's acreage seeded to barley totaled 5.880 million acres, down 17% from 2013 and the lowest area on record since 1964. This is also well below the five-year average of 7.328 million acres seeded to barley. Average yield in 2014, reported at 61.9 bushels per acre, was 13.7% below 2013's record yield, although slightly higher than the average of the previous five years.

The result was total production of 7.119 million tons, down 30.5% from the previous year and the lowest on record since 1968. This was also well below the previous five-year average production of 8.659 mmt.

Ending stocks for 2014/15 are currently estimated at 650,000 metric tons by Agriculture and Agri-Food Canada, down 66.2% from the 1.9243 mmt carried out of 2013/14, which would be a record low and well below the five-year average of 1.621 mmt. This would reflect a stocks-to-use ratio of 7.7%, down from last year's 20.7% and the five-year average of 17.9%. The barley market is in uncharted waters.

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While domestic consumption is expected to be well below last year's levels based on declining livestock numbers, exports are running ahead of last year's pace. Current AAFC forecasts suggest a slight year/year decline in barley exports to 2.350 mmt in 2014/15, while the latest Canadian Grain Commission data shows year-to-date exports at 899,000 mt (licensed exports only) as of week 35, or the week ending April 5, which is 5.5% ahead of the year-ago pace.

The feed barley price reached a seasonal low of $164/metric ton delivered southern Alberta in mid-September, while the most recent weekly data as of April 12 reports a delivered price of $215/mt, while cash traders suggest that $220/mt will trade this week, which would take out the May 2014 weekly high of $218/mt.

The question remains how old-crop will respond moving forward? Looking at the attached chart, price has trended lower from a $296/mt high in June 2013 to a low of $153/mt in January 2014. The longer-term trend has since been higher, stalling at a high of $218/mt by mid-May 2014 before drifting lower to $164/mt by mid-September. Since then, prices have trended higher to the $220/mt area this week.

The 50% retracement of the move in the downtrend from $296/mt to $153/mt is $224.50/mt, a possible area of resistance, while a move above this level could result in a further move to the 61.8% retracement at $241.37/mt.

Grain bins are currently locked as we head into the spring season, while buyers may be challenged to look further from home for supplies which will lead to transportation issues. Good barley in eastern Saskatchewan is reportedly being pulled in an easterly direction, which will further tighten available supplies for the west. A further move higher may be inevitable, although predicting tops is a dangerous game.

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

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