Feed barley delivered Lethbridge has been reported by ICE Canada's Cash Prices to range over a narrow $15-per-metric-ton range since August 1 or the beginning of the crop year. The bulk of the trade was between $210 and $220/mt. Only two days in December showed bids below $210/mt as sellers found end-users have met their needs for the holiday season.
Weak fundamentals could weigh further on prices in the New Year, given a number of factors:
1) Statistics Canada's Dec. 4 production estimate for barley was higher than expected at 8.226 million metric tons, above the pre-report trade estimate of 7.3 to 7.8 mmt and higher than the previous estimate of 7.6 mmt. This represents a 1.1 mmt increase in production from 2014 and is slightly higher than the five-year average.
2) Last year's weather challenges on the Prairies is creating problems for maltsters, with much of the 2015 crop high protein or chitted, which is increasing supplies of feed.
3) Barley exports are lower year-to-date. While Agriculture and Agri-Food Canada increased their estimate for barley supplies by 616,000 metric tons based on the higher Statistics Canada production estimate, AAFC also lowered its projection for 2015/16 exports by 100,000 mt. As of week 20, exports through licensed facilities are reported at 385,100 mt, down 23.6% from the same week last year and 29% below the five-year average.
4) Producer deliveries of barley into licensed facilities are behind year-ago levels. As of week 20, or Dec. 20, the CGC reports that 967,900 mt has been delivered into licensed facilities, down 15.2% from last year and 19.4% behind the five-year average.
5) Producer deliveries of some other grains are ahead of last year, suggesting that cash flow is generated elsewhere and barley may continue to be slow to come to market. For example, as of week 20, producer deliveries of wheat are 1% above year-ago levels and producer deliveries of canola are 10.6% above year-ago levels.
6) For the most part, southern Alberta has experienced a mild winter which will lead to favorable feed conversions. At present, the 14-day forecast through to January 12 for Lethbridge shows daily highs ranging from 1 degree Celsius to minus 8 C.
7) Ending stocks for barley, according to AAFC's December analysis, will jump to 1.8 mmt in 2015/16 from the 1.217 mmt carried out of 2014/15. This would represent a level which is 31.5% above the five-year average. This is assuming a higher feed usage than last year which could be argued.
8) Broker reports suggest continued interest in wheat by feed users which will take a bite out of barley demand.
The next Statistics Canada report is the Stocks of principal field crops for Dec. 31, which is slated for Feb. 4.
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