Barley bids firm, but more downside than upside ahead

Tight supplies combined with prudent farmer selling are keeping feed barley bids well supported in Western Canada for the time being.

However, declining wheat prices and improving North American moisture conditions heading into the summer have the potential to weigh on values going forward, according to a feed grains broker.

Barley delivered into the key Lethbridge, Alta. feeding area is holding steady around $285 per tonne for spot delivery, with prices $5-$10 higher for delivery later in the spring, said Jim Beusekom of Market Place Commodities at Lethbridge.

Meanwhile, declining milling wheat prices are seeing more wheat diverted into feed rations, with pricing for spot delivery and through the summer coming in at $290-$295 per tonne. With the two grains at basically the same price, feed users will turn to wheat over barley, said Beusekom.

Imports of U.S. corn and dried distillers grains with solubles (DDGS) are virtually non-existent in the current market, with the weaker Canadian dollar making imports unattractive, said Beusekom.

Going forward, "it’s all about weather," he said. Barley stocks on farm are low, which is making it hard for end-users to pry it away from producers until the new crop year gets closer.

However, "if milling wheat values continue to decline with improved U.S. weather conditions… then we’ll see wheat values decline," he said, noting that there is a lot of wheat left unsold in the Prairies which could displace more barley in feed rations.

Another potentially bearish factor overhanging the barley market is the fact that cash bids for feed grains have not declined to the same extent as the U.S. corn and wheat futures markets.

While basis levels have improved significantly for farmers, "that can quickly change when the grain becomes available and farmer selling picks up," said Beusekom.

Farmers are currently in control of their selling and are forcing the market to pay the price they’re looking for, he said.

Solid demand and tight barley supplies may make that work for now, but as the 2013 harvest approaches producers will eventually begin to offload that grain, which will weigh on prices.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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