Canada: July PRO’s unchanged for 2010-11 barley crop, decline for 2011-12

The Canadian Wheat Board (CWB) released on July, 28 its latest Pool Return Outlooks (PROs) for the 2010-11 and 2011-12 crop years.

In the 2010-11 PRO, Barley remains unchanged from the June report, reflecting its nearly sold status – select two-row malting barley at C$249 per tonne, select six-row at C$232 per tonne, and Pool B feed barley at C$233 per tonne.

Barley market price declines since the last PRO have not materially affected these pools, as they are very close to fully sold with the majority of farmer deliveries receipted and shipped to customers, the Board said.

While the wheat, durum and designated barley 2010-11 pools are largely priced at this time of the marketing year, they are not fully sold and there remains a considerable volume of grain to be receipted from farmers and shipped to buyers. With the current financial problems affecting the world's economy, volatile foreign exchange relationships and grain market prices are contributing more-than-typical levels of uncertainty to the pool return estimates, the CWB said.

In the Pool Return Outlook (PRO) for the 2011-12 crop year, malting barley values decreased by C$11 per tonne and Pool A feed barley is down C$13 per tonne.

The value of select two-row malting barley is set at C$339 per tonne, select six-row at C$322 per tonne, and Pool A feed barley at C$240 per tonne.

2011-12 CWB PRO Commentary

Malting barley
The weather market in Europe has subsided and prices have made their inevitable corrections over the last month and a half. Prices decreased by $50 to $70 U.S. before levelling off when end users stepped in to take further coverage. Lower European production estimates and reduced planted area in North America have decreased the potential supply of malting-quality barley, keeping prices volatile over the last month. Now that harvest has begun in the Northern Hemisphere, the focus will switch from overall production size to quality results. New-crop malting barley supplies are highly dependent on harvest weather, and prices will remain volatile as we move into August and September. Prices are expected to remain firm until January when production in Australia and Argentina is expected to cause a decrease in values. The overall supply of malting-quality barley from these two countries is expected to be large, as Southern Hemisphere production typically has less quality risk than in the Northern Hemisphere.

Malting barley trade is forecast similar to last year, with increased demand for early delivery periods due to tight supplies coming into 2011-12. Prices in North America will be sheltered to some extent from lower international prices because a smaller U.S. barley crop will provide a higher-priced market for malting barley trade this year. China, the largest importer of barley, is forecast to have strong barley demand in 2011-12. However, China is expected to defer some demand until purchases can be made from Australia and Argentina.

Feed barley
The barley price structure in 2011-12 will be set by exports available from the Black Sea region. Ukraine, the largest of the Black Sea exporters, will help cover demand from the Middle East this year, but is forecast to increase exports by only 800 thousand tonnes. Tight supplies in Europe and Canada will help prices remain firm until January, when new-crop barley supplies become available from Australia and Argentina, which are both forecast to have large barley crops. The world's largest feed buyer, Saudi Arabia, is showing signs of tight barley supplies and is forecast to increase its feed barley demand moving into 2011-12. If this demand is realized it will help mitigate the downside price impact.

Like the other return projections this month, barley is being impacted by the strong Canadian dollar, the CWB said.

29 July, 2011