Canada Markets

New-Crop Feed Supplies Can't Come Quick Enough

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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Statistics Canada released the monthly Farm Product Prices, with this chart focusing on Alberta's slaughter prices for cattle and hogs to the end of May. Cattle reached a new record high, 36% higher than May 2014, while hog prices rebounded sharply from April's low, which was the lowest level reached since January 2011. (DTN graphic by Nick Scalise)

A perfect storm consisting of tight barley stocks on the prairies, drought on the western prairies which will slow cash sales of grain along with cattle which should be destined for grass but instead fed in feedlots will test the supply chain prior to new-crop arrival.

July 31 ending stocks for barley in Canada were estimated at 1 million tons in Canada by AAFC in the June report, close to the 983,000 metric tons carried out of the 2012/13 crop year, which was a record low. Over the past five years, an average of 21.8% of total supplies have disappeared in the four-month April-through-July period, which would suggest the carryout could be closer to 1.4 mmt given current estimates for supplies and Statistics Canada's March 31 stocks estimate.

Spot prices for feed barley delivered Lethbridge are indicated at $245/mt, with weekly data from the Alberta Canola Producers showing the average bid jumping from $202/mt at the beginning of June to $246/mt for the week ending July 3, with the largest jump taking place in the most recent week when bids jumped from $230/mt to $246/mt. This remains well below the spring of 2013 when reported weekly average price reached $297/mt.

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Canada's cattle number as of Jan. 1 were reported at 11.9 million head, the lowest count since 1993. The recovery in cattle numbers that was hoped for in 2015 has been derailed by drought conditions on the prairies which has forced cattlemen to either scramble for high-priced feed supplies or liquidate animals, adding to the already difficult decade faced in the industry. While Canada's packing plants are running at a seven-year low of 74% of capacity, Alberta Agriculture has suggested this situation could lead to four to six years of tight supplies.

The current barley price delivered southern Alberta has retraced more than 61.8% of the move from the May 2013 high of $297/mt to the January 2014 low of $153/mt, considering weekly data provided by the Alberta Canola Producer Commission, with nearby resistance found at the 66.7% retracement at $249/mt.

Barley prices should continue to see support from recent crop reports, with Alberta's June 29 report rating the provinces barley crop at 28.9% good to excellent, down 10.3% from the previous week with almost all of southern Alberta rated as much below normal moisture. Saskatchewan's crop was rated at 53% good to excellent, down 10% in the previous two weeks, with 15% of the crop rated as poor to very poor.

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

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