USA: Barley acres expected to decline significantly in 2017

To no one’s surprise, the US barley acres are expected to decline significantly in 2017, according to the Prospective Plantings report issued by USDA on March 31.

Nationally, growers intend to plant approximately 2.5 million acres of barley this year, which is 17 percent less than the 3 million acres seeded last year.

According to Steve Edwardson, executive director of the North Dakota Barley Council, growers in the state intend to plant 470,000 acres this spring, a decrease of 36 percent from last year’s 740,000 acres. The following table, prepared by Edwardson, shows the trends in harvested acres for the key barley producing states in the U.S.

A brief review of production history over the last two years is needed to better understand the barley marketing outlook growers are currently facing.

“In general, growers in North Dakota experienced good yields and quality in the last two crop years of 2015 and 2016. The malting and brewing industry had relatively high acceptance rates for malting barley, and consequently it will take time for the industry to process the supply, thus resulting in reductions in planted acres and production for 2017,” Edwardson said.

In 2015 and 2016, North Dakota growers produced 67.2 million and 42.88 million bushels, respectively. Estimates for 2017 (based upon average yields) place North Dakota barley production in the range of 25-30 million bushels. The current scenario suggests a three-year cycle in which buyers will build supply in one year and thus reduce purchases in the next two years until supplies are depleted. This pattern indicates that buyers will increase purchases in 2018.

The latest USDA-NASS Grain Stocks report, which also came out on March 31, indicated a decrease of slightly over 9.5 million bushels of barley from March 1, 2016 or about 19 percent. This would indicate, Edwardson noted, that deliveries are occurring as the industry works to process the supplies from the previous two crop years. On a national level, the stocks on March 1, 2017 were 6 percent higher than at the same time in 2016,

This large level of barley stocks has resulted in the 2017 malting barley contracting programs being reduced significantly from last year. Buyers have reduced contracted production from 50 to 80 percent from 2016 levels.

“These contracts filled early,” he said, “with prices in the range of $4 to $4.50 per bushel. Buyers have indicated that it will simply take time to process and deplete current inventory levels.”

As far as international marketing, Edwardson said Mexico continues to show near term potential as an export market for malting barley. Mexican imports of U.S. barley have been around 400,000 metric tons over the past five years. Exports of feed barley to Japan have been minimal due to adequate supplies and competitive pricing from Australia, Canada and Ukraine.

The International Grains Council (IGC) projects barley stocks to tighten globally as demand for barley increases for both livestock feed and malting for beer. Developing countries are increasing meat consumption, thus driving the increase for feed barley. Beer consumption in China, Asia and Latin American is expected to increase, thus increasing the need for malt. Global barley production is anticipated to experience modest, but steady growth, over the next five years.

Current spot cash prices for barley in North Dakota are soft due to those carryover inventories. Prices for malting barley are in the range of $3-$3.75 per bushel, with many buyers offering no current bid. Feed barley prices are in a range of $1.60-$2.20 a bushel.

The shift from open market production to contracting programs is resulting in fewer buyers of spot cash malting barley in the marketplace. Feed barley prices remain weak due to limited market outlets, lack of export demand and overall abundant supply of carryover stock from 2016.

20 April, 2017