(Resource News International) — Larger than anticipated 2008-09 supplies of feed barley in Western Canada, reduced demand for the commodity from feedlots and a sharp reduction in domestic prices are expected to result in more of Canada’s feed-quality barley being available for export on the world export market during 2009-10.
“There were definitely large supplies of feed barley still left on farm that will need to be delivered in order to make room for new-crop supplies,” said Jerry Klassen, a Winnipeg trader and grains analyst.
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Normally domestic feed barley prices in Western Canada trade at a premium to the world export price, which results in producers delivering into the cash market instead of to the Canadian Wheat Board for movement onto the export market.
With the increased supply of old crop making its way to the market and new-crop barley supplies coming directly off the combine and into the grain elevator, values for the commodity in the cash market have declined significantly, he said.
Klassen felt producers ended up holding onto a lot more barley than they wanted to in hopes of being able to garner better prices.
Statistics Canada pegged July 31 barley supplies in Canada at 2.843 million tonnes, which compares with 1.568 million at the same time a year ago and compares with pre-report guesses of 1.9 million to 2.2 million tonnes.
“The importation of dried distillers grain (DDG) from U.S. ethanol facilities has also served to weaken the cash market for barley,” Klassen said. “The lower prices for alternative feed sources has started to flow in Western Canada very aggressively and now the farmer is being forced to sell at lower prices.”
With barley supplies at 2.843 million, he said, that would represent at least a 300,000-tonne increase over the 10-year average. And with supplies that much higher, the cash barley price, basis southern Alberta, should be trading at $10-$15 below the 10-year average.
Adding to the problem for producers with feed barley is that the larger feedlots in Alberta, Saskatchewan and Manitoba have booked DDGs right through to January, which will take even more domestic demand away from feed barley, Klassen said.
Reduced livestock inventory numbers in Western Canada will also see reduced demand for feed barley, he said.
Export demand
Klassen said that with the reduced price for domestic barley, values have started to match international feed barley values, which could translate into more Canadian barley making its way onto the export market.
Based on the reduced demand for feed barley, the increased supply and so on, Klassen forecast that feed barley prices in Western Canada could easily see another $20 drop from the $146-per-tonne price basis Lethbridge value.
The initial price for No. 1 Canada Western (CW) feed barley being offered by the CWB to farmers is presently $101 per tonne. In its pool return outlook (PRO) for feed barley, the CWB was projecting values to hit $154 per tonne.
He acknowledged Canada has not been very price-competitive on the global export market and that’s probably why the CWB hasn’t necessarily had an aggressive feed barley export program.
Klassen estimated that based on the lower livestock inventory, the increased usage of DDGs in feed rations, the larger 2008-09 carryout supplies, the 2009-10 outlook for Canada’s barley ending stocks could be 25-30 per cent higher than the 2008-09 level.
“However, whether that number is realized will depend on the export demand picture,” he said.
“I don’t think feed barley from Canada is very price-competitive to destinations like the Middle East, but Canadian feed barley is starting to be well priced when looking into the Southeast Asia market,” Klassen said, especially noting the uncertainty surrounding the Australian barley crop.
Should export demand materialize for Canadian feed barley, Klassen felt, then the 2009-10 ending stocks supply of barley would be similar to that of 2008-09.
Ending stocks of Canadian barley of roughly three million tonnes are considered burdensome, while stocks around two million are verging on tight.
