Barley prices have proved to be an accurate leading indicator of what is to come in the corn and feed grain market
Reuters / Keep your eye on barley prices.
Morocco’s recent removal of import duties on feed barley sets the stage for a scramble by other importer nations to cover their own barley needs in the weeks ahead. As a result, U.S. barley stocks can be expected to decline, and any steep cut in barley supplies could boost prices for corn and other feed grains.
Morocco’s tariffs cuts are noteworthy because the country is one of the world’s top barley growers of the crop and rarely ranks among the top 10 importers of the crop. It highlights the extent of possible supply shortages facing large barley consumers over the coming year following growing problems in the E.U. and Black Sea due to frost and in North Africa due to drought.
Saudi Arabia has been the world’s top barley importer for the past several years by a steep margin, followed by China and Japan. But whereas Saudi Arabia’s barley inventories have been edging higher in recent years, stocks levels in Japan, China, Morocco and elsewhere have generally been on the decline. This has placed downward pressure on the barley stocks-to-use ratio in each country, thereby pushing up prices in a number of regions.
Limited reliable barley price intelligence is available for all major consuming nations, but it is clear from a comparison of the export price of barley in an array of exporting countries that a firm price bias has gripped the market in recent days as global supply concerns erupted.
Price strength is particularly evident in Canada, which has seen the export price of barley climb by more than six per cent since the beginning of March.
Barley prices tend to move in close tandem with corn’s, and on occasion have proved to be an accurate leading indicator of what is to come in the corn market, such as in 2007 when barley prices burst higher in a precursor to what was coming in the corn market several months later.
U.S. planting and growing weather will still have the ultimate say on which direction the corn price trends over the coming weeks. However, given the strong likelihood of an increase in the demand for U.S. barley following Morocco’s recent steps to boost imports, savvy corn traders will be putting barley price and shipment data alongside their weather gauges as they attempt to navigate the corn market going forward.