Barley markets were quiet this week as the world transitions from focusing on southern hemisphere weather to northern hemisphere weather.
In Argentina, we all know that things are pretty dry. This isn’t necessarily great for the cereal crops – including barley – that start to get planted in April. Conversely, there have been some heavy spring rain events in the European Union. The wetter conditions have delayed fieldwork in many parts of the continent, which could impact spring barley seeding.
This is especially true in Germany spring barley accounts for accounts for less than 20% below total barley production in the country: spring barley production in Germany was 2 million tonnes in 2017, while winter barley (crop that is seeded in the preceding autumn) was 9.3 million tonnes, for a total German barley crop of 11.3 million tonnes.
Speaking of acres, on Thursday, March 29th, the USDA came out with the Quarterly Stocks and Prospective Plantings report. For barley, the USDA is estimating that American farmers will seed 2.29 million acres of barley this spring. That’s 8% lower than last year’s 2.48 million acres but 27% below the five-year average of 3.144 million acres. Something to keep in mind is that the USDA tends to overestimate barley acres at the beginning of the year from what the final ends up being by about 8%. Speaking plainly, this means that the US barley acreage number could drop even more.
From a stocks perspective, the USDA is estimating that there is a little over 129 million bushels American barley till left in the pipeline as of March 1st, 2018 (or about 2.82 million tonnes when converting bushels into tonnes at GrainUnitConverter.com. This is nearly 11% below the 144.7 million bushels of American barley available at the same time a year ago, but pretty much the same as the five-year average of nearly 128 million bushels.
Canadian barley demand within the country has slowed down a bit. Through Week 34 of the 2017/18 crop year, 785,700 tonnes of barley have been used up, which is about 9% below the 860,200 used at this time a year ago. Similarly, exports have slowed down a bit as of late, but at 1.3 million tonnes shipped out so far, that’s 77% higher than through Week 34 of last year. However, given the strong pace, Agriculture Canada did recently raise their estimate for Canadian barley exports to 2.7 million tonnes (we think the number could still go higher yet).
Speaking of exports, Tunisia’s state grain buyer bought 25,000 tonnes of feed barley at a delivered price of $246.24 USD / metric tonne (or $5.36 USD and $6.93 CAD per bushel). This is up about $6 USD / tonne from a similar tender made at the beginning of March.
According to the AAFC, global feed barley prices are trading at about a $30 USD / metric tonne premium over corn. The five-year average is just $13 USD / metric tonne. They also note that world feed barley prices, seasonally-speaking, tend to top out at the end of February, and so their optimism for feed barley prices to remain where they’re at is fading. Conversely, world malt barley prices are only sitting at $30 USD / metric tonne above world feed barley prices. The five-year average is $80 USD / metric tonne.
Back in Canada, we know that feed barley prices remain elevated (as shown in the chart) while malt barley prices are not. Like world malt and feed barley prices, the domestic spread has narrowed significantly over the past 3-4 months. This mind, we don’t think that malt barley prices are going to go much higher in the short term, which means that feed barley prices are more than likely to pull back. If we see a slower thaw this spring, you might see more barley get seeded instead of other crops (i.e. canola) because of a shorter growing season. That’s certainly up in the air though right now.
You can also argue seasonality factors here as well for feed barley prices but the point is that there is definitely more downside risk than upside potential for feed barley prices right now. For malt barley, there is more upside potential as prices have been sitting at today’s values for basically the past 6-7 months.
With no sales this past week, for 2017/18 old crop, we sit at 90% sold on feed barley and remain at 40% sold on malt barley. For 2018/19 new crop, we now sit at 20% sold on feed barley and remain at 0% sold on malt barley.
Have a great week!
– Brennan, Garrett, and Adrian
March 23 – Saudi Arabia Looking For Another 1 MMT of Feed Barley
March 23 – Where’s All The Feed Grain in Western Canada?
March 18 – Barley Weekly GrainCents Digest
March 14 – With Slow Rail Movement, How Far Are We From The Top of The Barley Market?
March 12 – Canadian Cattle Herd Not Getting Bigger
March 12 – What Will Feed Barley Prices Do From Here on Out?