This past Friday, on April 27, Statistics Canada released its farmer-survey-based results of 2018 acreage intentions of Canadian farmers. Going into the report, the market had a pretty wide range of expectations, ranging from 5.25 to 6.8 million acres of barley.
StatsCan basically put their farmer-survey-based in the middle, forecasting that Canadian farmers will plant 6.06 million acres of barley in 2018/19. This is up 5% year-over-year, with most of the expansion attributed to increased acres in Saskatchewan and Alberta.
According to StatsCan, farmers in Saskatchewan will plant 2.46 million acres of barley in 2018/19. This is up 140,000 acres, or 6%, from the year before. Next door in Alberta, producers in the Wild Rose province will seed a little less than 3 million acres in 2018/19. This is up 130,000 acres year-over-year, or 5% higher.
Pricewise, we argue that this StatsCan report is mostly neutral-to-bearish for barley prices. There continues to be a strong demand on both the domestic and export markets, but there are obvious concerns that farmers are chasing today’s prices without locking in for tomorrow’s delivery.
More concretely, we’ve historically seen feed barley prices find cyclical highs every 3 years or so, before pulling back significantly as acres expand. That being said, we did see some prices pop a bit higher in Lethbridge last week for feed barley prices, but this is likely due more to seasonal demand (read: “road ban demand”) than it is a reaction to the StatsCan report.
The barley market is one of the few in Western Canada that is experiencing a good grain movement since 2017/18’s farmer deliveries and exports are ahead of last year’s pace. China continues to prove itself as a big market for both feed and malt barley, as we noted the People’s Republic are getting more “crafty” when it comes to beer.
This week, we also noted that Cargill is shuttering its Spiritwood, ND malt barley plant. This removes about 410,000 tonnes of annual malt barley demand from the North American balance sheet. It can be argued that this demand will move elsewhere but Cargill’s main argument for closing the plant is that the can’t process enough 6-row barley (the market mainly wants 2-row!)
While the barley market is experiencing a good crop movement overall, we need to point two bearish factors. Commercial stocks that are piling up are becoming a bit alarming and another minor bearish factor we’ll need to watch out for. One logical explanation is that there are logistical issues, but we could also point to slower demand south of the border. The second minor bearish factor is that Canadian domestic disappearance is now tracking behind last year’s pace.
On the crop movement front, a strong pace of weekly producer deliveries reported until a week ago. Cumulative farmer deliveries though continue to track ahead of last year’s pace.
Moving forward, there is certainly some risk that Canadian barley acres could actually end up higher than the 6.06 million acres forecasted this past Friday by StatsCan. This is mainly due to the potential for a delayed Plant 2018 seeding campaign, meaning more barley acres go in instead of the likes of canola or flax or even some peas. Thus, there continues to be more overall bearish downside risk to the barley market. That being said, we remain cognizant of the presence of a lower Canadian Loonie and weather risk providing additional upside potential for barley prices.
If you are not at 20% sold on 2018/19 new crop feed barley, we’d strongly recommend you get it posted on the FarmLead Marketplace today. For 2018/19 new crop, remain at 0% sold on malt barley.
For 2017/18 old crop, we are sitting at 90% sold on feed barley and 40% sold on malt barley.
Have a great week!
– Brennan, Garrett, and Adrian
April 27 – StatsCan Expects 6.06 Million Acres of Barley in Canada in 2018/19
April 26 – Feed Barley Prices, Not Malt, Encouraging More Acres
April 25 – China’s Beer Market is Getting “Crafty”
April 25 – Will Canada’s 2017 Malt Barley Crop Ever Be Topped?
April 23 – Cargill Closing A Major Malt Facility in North Dakota
April 23 – China’s Barley Market is Changing Gears
April 22 – Barley Weekly GrainCents Digest
April 18 – Who’s Running The Show for US Free Trade?
April 15 – Barley Weekly GrainCents Digest