Cash prices for Lethbridge barley have recovered slightly from recent lows as harvest moves forward in the west, with data from the Alberta Canola Producers Commission showing a low of $155/metric ton reached Sept. 2 while inching higher to $158-$159/mt since then. This could be the calm before the storm when the quality of the 2016/17 crop is fully realized and the impact of increased volumes of feed-quality grains are taken into account.
The attached chart indicates that over the past five crop years, the 2013/14 and 2015/16 crop years show the highest stocks/use ratio of 21% and 17.7% respectively, based on Statistics Canada data. These two years also resulted in the largest price moves lower between the first week of September and the end of the crop year or the last week of July. In the 2013/14 crop year, the price ended $18/mt lower by the end of the crop year and in 2015/16 the price ended $25/mt lower.
Current AAFC estimates suggest a stocks/use ratio of 20% for 2016/17, with ending stocks expected to increase approximately 18% to a three-year high of 1.7 million metric tons. This is well above the estimated five-year average of 1.358 mmt. There are reasons to believe that these estimates could prove to be close to the actual finalized data. First of all, AAFC's Sept. 1 estimate of July 31 ending stocks was only 43,000 mt below the final Statistics Canada estimate. As well, over the past five years, the Statistics Canada final December estimate of barley production has averaged only 1.6% higher than the July estimate, the closest of all major grains. The unknown which could weigh heavily on barley fundamentals is if large quantities of feed quality grains such as wheat or durum take a larger-than-expected bite out of barley demand, which could eventually be the case.
Cliff Jamieson can be reached at firstname.lastname@example.org
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