Barley markets this past week traded relatively sideways with ideas of more acres offsetting some colder temperatures that would spring some additional demand.
Looking abroad, spring seeding in Ukraine has been delayed significantly, with just 12,100 acres of planted of all crops through the end of the March. This, from data shared by the Ukraine Ag Ministry earlier this week. There are strong expectations that seeding speed will pick up over the next 2 weeks as the weather improves. Comparably, at this time a year ago, 3.95 million acres had been seeded.
12,100 versus 3.95 million. There’s a bit of ground to make up there!
Ukraine is expected to seed 18.3 million acres of spring crops this year. About 5.93 million of these acres will be attributed to spring barley and spring wheat, which are planted first. The rest will go into the likes of corn and buckwheat, which get planted later. Specifically to barley, 3.95 million acres of spring barley is expected to get seeded this year in Ukraine, down about 100,000 acres from last year.
Around the rest of Europe, there is certainly some optimism about the spring barley crop. After a bit of poor quality year in the United Kingdom, more barley acres are going in. Across the rest of Europe, there is a similar theme of more spring barley acres being seeded as, a wetter autumn limited fall/winter crop seeding.
Switching back to North America, we provided some perspective this week on whether or not barley could be on the list of NAFTA “free-trade-commodities” that get scrapped.
The dark horse event to watch next week is the possibility of a major announcement on NAFTA. This week, Canadian Prime Minister Justin Trudeau hinted that leaders in the United States, Mexico, and Canada could be making a major announcement on trade next week. It would be welcome news at a time that fear has been consuming so many people in the trade.
On the pricing front, we’ve seen some stronger prices for feed barley in Northern and central parts of Alberta. This is mainly due to the inability for these northern areas to be able to switch into corn, which has become readily available in Lethbridge, given its proximity to the US border. Feed wheat prices in these areas have also improved.
Canadian Grain Commission just released their February 2018 monthly data exports, and China continues to be taking the largest amount of Canadian barley. In fact, it’s expected that Canadian malt barley exports to China alone will top 1 million tonnes for the 2017/18. This would be a new record!
Staying in China, they threatened the US that they would start putting 25% import tariffs on many American agricultural products, namely soybeans. The list, however, also includes the likes of wheat, corn, and sorghum, all major feedstuffs that could potentially replace soybeans.
The Chinese livestock industry heavily relies on U.S. soybean shipments to feed its surging animal herd. The nation can’t source enough domestic supply and shipments of soybeans from Brazil and Argentina. We’ve seen estimates as high as a 30 MMT deficit for China, although substitution potential and additional sourcing is possible. Brazil may be able to increase shipments to China by another 8 MMT, but Argentina’s crop remains in trouble, and price premiums shot up this week along the nation’s rivers when China first issued the threat. Canada, Europe, and other South American countries just can’t provide what is needed to meet expectations.
This intuitively creates opportunities for other feedstuffs from other countries to play a role. While this is entirely speculative since the tariffs ARE NOT yet in place (as Brennan mentioned in this past Wednesday Breakfast Brief), the point is that we have to look at the possibilities of the musical chairs.
Barley and sorghum become interesting players in this musical chairs game. We’ve already noted a month ago that Australian barley acres are forecasted to rise in 2018/19, back up to about 10 million to produce a 9-million-tonne crop. But if these soybean tariffs go into place, you could see a lot of those barley acres go into sorghum instead. And thus, it opens the door for even more Canadian barley to make its way into China. Again, while speculative, this is one very plausible scenario, should China actually enact their tariffs on US soybeans and other agricultural commodities.
Coming back to North America, cumulative Canadian barley exports through Week 35 (ending April 1) of the 2017/18 crop year are pegged at 1.38 million tonnes. This is up 80% year-over-year, as just 760,000 tonnes were exported at Week 35 in 2016/17. Compared to the three-year average of 800,000 tonnes, 2017/18 Canadian barley exports are up 72%.
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.
P.S. We saw terrible tragedy in Saskatchewan this weekend, with the Humboldt Broncos junior hockey team bus getting in a significant accident. 15 members of their team passed. This one hit home for us. Feel free to read a few thoughts on what “the bus” means from Brennan’s perspective.
– Brennan, Garrett, and Adrian
April 6 – New Record For Canadian Malt Barley Exports
April 6 – More Optimism for UK Barley Crop in 2018
April 5 – Will Bill C-49 Be Enough to Fix Canada’s Rail Problems?
April 5 – EU Spring Barley Expected to Hold Bigger Responsibility in 2018
April 4 – Will Barley Be a Part of any NAFTA Re-Negotiation?
April 1 – Barley Weekly GrainCents Digest
March 29 – USDA Sees Lower US Barley Acres Again in 2018/19
March 25 – Barley Weekly GrainCents Digest
March 23 – Saudi Arabia Looking For Another 1 MMT of Feed Barley
March 23 – Where’s All The Feed Grain in Western Canada?