Grain markets are mostly in the red this morning, with only oats and corn prices finding a bid, the latter of which has had me thinking more about feed barley prices.
“The only way to be sure of catching a train is to miss the one before it.” – Gilbert K. Chesterton (English author)
Feb. 20 –Are Feed Barley Prices Being Reigned in by Corn?
Grain markets are mostly in the red this morning, with only oats and corn prices finding a bid, the latter of which has had me thinking more about feed barley prices (more on this later). Worth noting is that wheat prices are down hard this morning as part of their continued technical sell-off.
In the broader markets, the trade war talks towards the end of this week will take a backseat today to monetary policy, as the U.S. Federal Reserve will release its FOMC minutes and their outlook on where the U.S. economy is headed. Most market participants believe that it’s unlikely that the Fed will raise interest rates, especially since they have so much debt that’s about to mature very soon. 
Put simply, raising rates even a little would add a couple hundred billion dollars in extra debt service payments, which is on top of the roughly $400 Billion already paid annually! Thus, we’re looking to the U.S. Federal Reserve for their comments on the economy more than anything today, and not interest rates.
Soybean Prices Cheap Vs Corn Prices?
Soybean prices are heading lower again as the topsy-turvy nature of the trade war talks and slightly opaque export data is keeping volatility in the game. For example, last week, China bought some soybeans, but then it was also announced that they canceled some cargoes.  Canola prices have been acting a bit similarly, chasing the soybean complex. Kind of feels like 2 steps forward, one step back doesn’t it?
A recent Reuters poll of 12 grain market participants suggests that Brazil’s soybean harvest for the 2018/19 crop year will come in 114.6 MMT. In last Friday’s FarmLead Breakfast Brief on grain prices, I noted how CONAB recently lowered its estimate of the Brazilian soybean harvest to 115.3 MMT, but was thinking that this number could fall further to 113 or 114 MMT.
Ted Seifried of Zaner Ag Hedge Group notes that soybean prices are currently sitting about 60¢ USD a bushel above the mid-September lows.  Conversely, corn prices are just 15¢ per bushel off those lows. The argument is that ethanol has been keeping corn prices depressed. More specifically, Seifried notes that since “production has slid back to 2017 levels and ethanol stocks are approaching the early 2018 highs, this is the double whammy scenario.” Needless to say, this is keeping corn prices pretty cheap, and there have been some effects on other crops as a result, namely for feed barley prices.
Global Feed Barley Prices Pulling Back
As we wrapped up the 2018 calendar year, I mentioned in our review of the barley market that I was surprised at the resiliency of barley prices. Supporting the strength was strong demand in Saudi Arabia and China, as well drought conditions in Australia, limiting the size of both the barley harvest, and thus barley exports. However, the market has started to normalize a bit, as demand from the two largest imports (Saudi Arabia and China) has tempered off, and the market is already starting to look at 2019/20 supplies.
Strategie Grains notes that feed barley prices in the EU and Argentina have been tracking Australian values and have fallen by about $20 USD / MT in the past month (or 44¢ USD and 58¢ CAD per bushel if converting metric tonnes to bushels). That in mind, with more substitution effects from corn and wheat to replace feed barley, Strategie Grains lowered their estimate of EU barley exports from 5.8 MMT last month to 5 MMT this month.  They did, however, increase their estimate of the 2019/20 European barley harvest to 62 MMT, which would be an 11% jump from last year’s crop negatively impacted by drier weather in northern countries.
Saudis Weighing on Feed Barley Prices
In their most recent estimate of the Saudi market, the USDA’s foreign office there is getting less optimistic that the largest barley importer in the world is going to be buying a lot more in the 2018/19 crop year.  After all, the Saudis haven’t issued any tenders since early November! This is mainly attributed to good, but sporadic rains that have helped pasturelands grow, giving livestock producers the option to graze instead of feed.
Currently, the USDA is estimating that Saudi Arabia could import 8.5 MMT of barley in the 2018/19 crop year. However, the USDA’s FAS office in Riyadh has dropped their estimate to 7.5 MMT for 2018/19, and has given the same number for the 2019/20 crop season. Conversely, they’re expecting more hay to be imported by Saudi Arabia in 2019/20 as recent regulatory changes has led to less domestic forage production.
Today’s Feed Barley Prices Available Tomorrow?
On the North American front, recent cold weather has increased some of the trade volumes but feed barley prices have remained steady.  It’s been suggested, however, that more corn is going to feed rations in Lethbridge, which is certainly going to put some pressure on feed barley prices. Simply put, U.S. corn is cheap!
Strong activity of Canadian barley exports though continues to compete with the domestic market. Through Week 28 of the 2018/19 crop year, 1.3 MMT of Canadian barley has been shipped out, which is nearly 1/3 more than what had been exported at this time a year ago. Keep in mind that 2017/18 Canadian barley exports set a new record last year.
At the end of the day, current feed barley prices are still buying more acres for the 2019/20 crop year. This isn’t just true though in Canada, but also in the U.S., Australia, Russia, Ukraine, and, as mentioned, the European Union. Further, many countries are going to also be increasing their corn acres in 2019/20, including both Canada and the U.S. Thus, while today’s feed barley prices are certainly attractive, I am not confident that they will be here again at this time a year from now.
On the FarmLead Marketplace, we’re already seeing 2019/20, new crop feed barley prices at levels above recent years and the market is buying up supply. If you’re going to be planting barley this spring, I’d look to be about 35-40% sold at this point, possibly even up to 50% if you’re looking for more price assurance on at least one of your crops. Post your new crop barley deal today and take advantage of today’s feed barley prices before they’re gone tomorrow.
At 7:55 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.318 CAD, $1 CAD = $0.7588 USD)
May Corn: +0.8¢ (+0.2%) to $3.788 USD or $4.992 CAD
May Soybeans: -5.5¢ (-0.6%) to $9.09 USD or $11.98 CAD
May Soybean Meal (per short ton): -$2.10 (-0.7%) to $307.40 USD or $405.14 CAD
May Soybean Oil (cents per lbs): -0.04¢ (-0.15%) to 30.04¢ USD or 39.59¢ CAD
May Oats: +0.8¢ (+0.25%) to $2.763 USD or $3.641 CAD
May Wheat (Chicago): -7.3¢ (-1.45%) to $4.895 USD or $6.451 CAD
May Wheat (Kansas City): -5.3¢ (-1.1%) to $4.63 USD or $6.102 CAD
May Wheat (Minneapolis): -3¢ (-0.55%) to $5.523 USD or $7.278 CAD
May Canola: -4.8¢/bu (-0.45%) to $10.891/
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