Canada: CWB’s April PRO: malting barley unchanged for 2011-12; down C$1 per tonne for 2010-11

The CWB released on April, 28 its April 2011 Pool Return Outlook (PRO) for the 2010-11 and 2011-12 crop years.

In the 2010-11 April PRO, malting barley is down C$1 per tonne (to C$252 per tonne of select two-row and C$235 per tonne of select six-row malting barley), while Pool B feed barley is down C$4 per tonne to C$234 per tonne.

Global feed barley prices continue to favour barley originations closer to demand, with the most significant example being Saudi Arabia. The EU and Australia have both a proximity and logistical advantage under current market conditions. Corn values and overall coarse grain tightness support barley prices. The strong euro has a negative impact on EU competitiveness, the CWB commented.

Demand for malting barley is well covered for the remainder of the crop year, the CWB reports. There is a global deficit in quality malting barley but maltsters are aware of this fact and are behaving accordingly. Offshore customers are also deferring demand of quality malting barley until new crop production becomes available. The strengthening euro increases the U.S. dollar denominated export price and reduces the overall competiveness of the EU.

In the April PRO for the 2011-12 crop year, malting barley is unchanged (at C$328 per tonne of select two-row and C$311 per tonne of select six-row malting barley), while Pool A feed barley is up C$16 to C$247 per tonne.

The CWB 2011-12 PRO Commentary

Feed barley

World barley production is forecast to be 11 per cent larger this year, but still remain slightly under total world barley usage. A larger portion of the upcoming year's production will come from the Black Sea region, which is expected to produce a bigger crop after recovering from last year's drought. The larger production may not directly equate to large export numbers however, as the governments of Ukraine and Russia may not allow completely unfettered exports.

Barley supplies are tightening coming out of 2010-11, providing upward price momentum moving into 2011-12. Corn fundamentals are further supporting the feed barley price structure. Tight feed grain supplies will drag up feed barley prices throughout the marketing year. Although some areas of the world are reluctant to switch feed demand from corn to barley, the forecast corn price will certainly push further feeding demand to barley this year, which will further tighten global stocks and support higher feed barley values.

Although international feed barley values are forecast to remain firm into 2011-12, domestic feed barley values will be the key factor in determining feed barley exports this upcoming year. A return to more favourable cattle prices has seen herd size increasing over the last several months. With an increasing number of cattle on feed, domestic demand for feed grains will remain strong. If one could assume a return to a more normal production year, feed wheat availability should decrease and animal feeding should return to predominately barley. A delayed planting campaign across Western Canada may provide several different feeding options if a late crop results in downgrading of quality.

Designated barley

The pressure is on for a much needed supply of malting barley in 2011-12 after the poor quality crop of 2010-11. Tight global supplies of malting quality barley will put Canada's new crop malting barley in high demand from both domestic maltsters and international customers. Weather conditions have not been ideal so far, with a wet cool spring here in Western Canada delaying the start of seeding. In Europe conditions have moved from favourable to dry. It is still early in the production year, though, and a lot can happen before harvest begins.

The malting barley price structure will be supported by strong demand, but will also be under-pinned by global feed barley prices. The overall feed barley market will provide the base and strong malting barley demand will ensure a sufficient premium to feed barley prices to prevent malting quality barley from making its way into feed channels this year.

As with wheat and durum, the strong appreciation of the Canadian dollar is negatively affecting the pool return outlooks for barley this marketing year. The past month has shown an increase of over three cents, putting the Canadian dollar at a value of 1.05 against the U.S. dollar.

29 April, 2011