February 26: Why the Recent Rally in Feed Barley Prices?

In the world of feed grains, prices are climbing thanks to some pretty decent demand.

But corn sets the paces, and at current values, barley prices are deemed a bit high.

In the world of feed grains, prices are climbing a bit as supply is becoming a bit harder to source.

What’s clear though is that corn prices is setting the direction of feed wheat prices and feed barley prices. 

Feeders, who are making pretty decent margins today in North America, are starting to recognize the higher prices for feed grains. As a result, corn is becoming the cheaper substitute to feed barley, albeit it’s not a perfect switch.

Barley is selling at $230 CAD per metric tonne into Lethbridge for March / April 2018 movement , which is up $10 per tonne from where we started February at.

More Canadian barley continues to be exported as well, which is supporting values.

As I mentioned in our Sunday morning barley GrainCents digest, 1.015 million tonnes of the cereal have now been shipped out of Canadian shores. That’s up 94.5% year-over-year. 

This healthy barley demand, both domestically and abroad continues to support current prices.

However, what it also supports is the idea of planting more acres. Cue the ideas of us being at the top of the cycle.

As mentioned at the beginning of the month, Ag Canada is forecasting ~6.2 million acres, a jump of 7% year-over-year.   market could lead to stable high prices and an uptick in production.

What continues to be clear though is that because there’s also more corn in the pipeline, there will be a bigger supply of the two feedstuffs – corn and barley – in another 8 months from now.

Where do you think prices will be then?

As such, we’re starting to get a little more ready to look to pull the next trigger on old crop 2017/18 sales, but also starting to shop around new crop values for feed barley. 

New crop barley prices can be a bit tougher to come by at this time of year but some operations prefer to have a little coverage in September and October, versus scrambling for supplies.

Thus, they’re willing to lock in some prices in the next two months, in order secure their needed supply, versus being exposed to the market and being short in 6-8 months.

Look for our official call on these sales probably later this week though. 

 

Feed weekly outlook: Prairie feed grains following corn’s lead

A lack of available barley and steady rise in feed corn prices has pushed the market higher in southern Alberta.

According to Jim Beusekom of Market Place Commodities at Lethbridge, barley prices have risen from $220 per tonne, since the start of February, to the current price of $230 per tonne.

“The reason why price has gone up is barley exports,” he said, adding that “the price of corn relative to feed barley, has also gained in value.”

According to Canadian Grain Commission data, Canada has exported 981,900 tonnes of barley (as of Feb. 11) compared to 501,400 a year ago.

 Corn continues to be trucked in from Manitoba and the U.S., he added, and more farmers are switching to it because of the ready supply. Some feeders are having difficulty finding enough feed grains to cover their needs.

“Even though corn is still the same price or a little bit more money than barley, we are seeing feeders continuing to shift to using U.S. corn,” he said.

For the feed barley that is delivered, some farmers are managing to get $5 per bushel.

“That is bringing in more grain as it’s a target price for many farmers,” said Beusekom.

Corn continues to set the pace when it comes to price. If corn moves higher or lower, he said, he expects barley and wheat to follow suit to some extent.

Looking ahead to spring and summer, though, he sees a point where barley could begin to trade at a healthy premium to corn.

“The export business looks healthy and that should keep the odd farm prices fairly snug,” he said.

For now, though, all three commodities continue to trade in and around the $230 per tonne range delivered to Lethbridge.

“They’re all in sync,” he said. “However, it is difficult for feeders to buy enough barley, so in order to get enough feed grains they’re switching to using more corn all the time.”

There is the chance, however, that corn prices on the Chicago Board of Trade could rise or fall depending on a weather event, which would eventually trickle down to the feed market.

As well, the latest U.S. Department of Agriculture supply and demand report dramatically raised the ending stocks number for the U.S. to a whopping 2.48 billion bushels.

The estimate for the next harvest was also hiked to 14.6 billion bushels, 26 million higher than the previous forecast.

H/T: Canadian Cattlemen
About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.