Canada: Malting barley prices expected to begin at minimum C$5 per bushel this year
We have entered the time of year when the farm shows are in progress. The Crop Production Show in Saskatoon just finished and the Brandon Ag Days will begin this week. Traditionally this is when the maltsters and grain companies reveal pricing ideas for their malt barley programs, Canadian Malting Barley Technical Centre (CMBTC) reported on January 23.
Farmers anticipate malt barley prices to begin at a minimum of C$5/bushel (bu) and higher. There was not much in the manner of published prices from the Saskatoon Show, however C$5/bu was indicated for Sept/Oct. by some exporters and one maltster began its new crop program at C$5.25/bu.
To recap, the barley market has generally been good to barley farmers this past crop year. Malt barley prices have ranged from a low of C$230/tonne (C$5/bu) to a current price of C$268/tonne (C$5.85/bu) for June/July delivery. The feed barley market has also traded at attractive price levels throughout the year and it is presently trading at C$255/tonne in Lethbridge. The new crop bid is C$220 (C$4.75/bu) for Sept/Oct delivery. The situation for the feed, malt and export market will bring the barley carryover close to 1 million tonnes or less, which reflects the current higher feed prices.
On the export side, weather issues in Europe and Australia permitted Canadian malt and feed barley exports to move into China, Japan, Kuwait, the United Arab Emirates and Oman. While exports to China lag last year’s record pace (470,000 vs 557,500 tonnes), sales to Japan at 183,200 tonnes in the first five months already well exceed last year’s total program of 115,600 tonnes.
However, for new crop the scenario may be different. While Europe suffered through a drought-filled year, plagued by record high temperatures and lack of rains which dramatically reduced their crop production, in the coming year Europe is expecting production to recover, with barley stocks to increase by 11% and wheat by 15% over last year's numbers. This will create increased supply of grains in Europe where the country will have to hope for larger domestic usage and better exports to reduce the anticipated large carryover of barley and wheat. Naturally, the numbers are based on normal weather patterns. Australia is also forecast to produce a larger barley crop for this coming crop year. The Black Sea region, Russia and Ukraine are projected to have larger cereal crops next year and they are traditionally very aggressive in marketing their cereal crops. Providing there are no crop wrecks anywhere this coming year, barley supplies are expected to return to move historically average levels.
With respect to barley acres this coming year in Canada, they are generally expected to increase slightly and there are a few points to consider regarding new crop prices. With barley carryover around one million tonnes, there will be early demand for barley for both the malt and domestic feed industry. Prices for malt barley will likely range between C$5 and C$5.50/bu. Farmers who traditionally produce malt barley will probably continue to seed a malt barley variety. For farmers in southern Alberta, northern Alberta and some regions of Saskatchewan, it may be more attractive to seed feed varieties. Farmers that can produce 60 bushel-per-acre (bpa) wheat may be more inclined to seed it, as some companies have priced new crop wheat at C$7/bu. and although most prices are in the high-C$6-plus, there is always an element of optimism when it comes to wheat prices. Clubroot has become a serious problem for canola. Some farmers may attempt to return to a more normal crop rotation to eliminate this disease and some canola acres could shift to barley acres. Farmers will have to decide if C$4-plus feed prices and C$5.25-C$5.50/bu malt barley work into their farms’ financial plans.
The political problems that plague the world are affecting the fundamentals for grains. As stated before, the United States (U.S.) is buying domestic barley only for their beer industry and this has pushed Canadian barley out of the U.S. market. Will the U.S. trade war with China make U.S. corn and DDGs cheaper and more competitive in Canada, therefore pressuring barley prices this summer and for new crop? Eventually the trade war will get resolved; what it will have done to grain prices before it concludes is impossible to predict.
23 January, 2019
