Barley Prices Set for Course Correction in 2020?
Global barley prices are a bit in flux after bigger Canadian and European barley harvest, but a smaller one in Australia. With global stocks remaining near record lows, but barley prices trading relatively sideways for the last little while, there are a few factors that could move the needle in 2020.
Aussie Barley Prices Reflect Another Smaller Harvest
In their December production estimate, ABARES (the Aussie USDA) said that above-average temperatures and below-average precipitation significantly reduced expectations for the barley harvest (among other crops).  Explicitly, the Aussie barley Harvest 2019 was lowered by over 800,000 MT to settle in at 8.67 MMT, as per ABARES’ estimate.
Heading into the Christmas and New Year holidays, barley prices on the Australian east coast were sitting at around $400 AUD/MT or about $360 CAD/MT.  If converting metric tonnes into bushels, this adds up to about $7.85 CAD/bushel for barley prices, virtually sending the signal to all barley market participants to send your barley to east coast of the country continent, instead of abroad.
Canadian Barley Prices Weighed by Big Harvest
Before we get into those barley exports, Statistics Canada went the opposite direction of ABARES and raised its estimate of the Canadian barley harvest in its final report. Thanks to acres climbing 14% and yields up 9%f from 2018 to an average of nearly 71 bushels per acre, the Canadian barley harvest this year was pegged at 10.4 MMT. This would be up 2 MMT, or 24% year-over-year, as well as nearly 750,000 MT more than the initial estimate form StatsCan back in August.
With a lot more production on the books from the 2019 barley harvest, barley prices are looking around to where the demand is going to come from to clean up the balance sheet. Currently, Canadian 2019/20 barley exports are tracking only about 2% above last year with nearly 1 MMT shipped out through Week 22. While there’s more than half the crop year left to go, achieving Agriculture Canada’s current forecast of 3 MMT of total barley exports (including malt) seems possible, especially given another weak production year in Australia.
Feed Barley Prices Finding New Foundation
The last few weeks we’ve seen Canadian barley exports average about 50,000 MT and if that’s maintained for the next 24 weeks, that might be enough to meet AAFC’s full year target. That said, there are similar demand functions to that a year ago, which are supporting feed barley prices. While we’d like to see a bit more consistency, if barley exports starting to pick up, that will intuitively creating more competition for feed barley prices in Lethbridge and elsewhere.
That said, in early December, I warned that feed barley prices were likely near a short-term high. If you heeded that advice and made some sales, it was the smart risk management move as a few days later, StatsCan surprised the market with their bigger number.
While animals tend to eat more grain in the winter months, and farmers tend to sell around the new tax year, more market analysts expect some stability to creep into the market in the coming weeks.  To say though that feed barley prices will see another rally like it did at this time a year ago is extremely tough to predict. What we do know, however, is that there is a lot more feed grain supplies available this year than last year and that will put pressure on feed barley prices and other feedstuffs.
Malt Barley Prices Not Bad, But Not Great
Malt barley prices have pulled back a little recently, following feed barley prices. However, it’s not just the larger Canadian harvest pressuring bids, but also that out of Europe. While we did find some gains at this time a year ago, that was largely a function of the smaller 2018 barley harvest in the EU thanks to the dry conditions a year ago.
Thinking about 2020 malt barley prices though, my telescope is again focused on Europe. The bullish factor I’m watching is the wet fall that most of western Europe experienced, reducing the number of winter barley acres that got drilled in. For example, in France, combined precipitation in October and November was 70% above average! 
With the fall seeding campaign coming in below expectations, more spring barley acres are being anticipated by many analysts, especially in France and the UK. However, Germany didn’t get the same wet weather that France and the UK did and this is why Strategie Grains recently raised its forecast of total 2020 barley acres (both winter and spring).  They’re expecting total 2020 barley acres in the EU to total 29.65M for an estimated 2020 barley harvest of 59.6 MMT.
While this means EU acres are down about 500,000 and production is about 2 MMT less than 2019, this is slightly bullish for malt barley prices. I say this with caution though as you shouldn’t be expecting $6.50 – $7 CAD/bushel malt barley contacts unless the growing season weather in the EU is poor.
Barley Prices Will Provide a Return in 2020
That said, today’s malt barley prices and feed barley prices are still providing a decent return, especially when comparing it against spring wheat prices (and as mentioned in my spring wheat outlook!). However, with Agriculture Canada currently estimating that barley ending stocks will basically double-up year-over-year, there will continue be a bearish cloud that weighs over barley prices in Canada.
What that adds up to is the potential for a slight dip in Canadian Plant 2020 barley acres, but at current barley prices, that reduction won’t be all that significant. In fact, we see barley exports pick up in 1Q2020 and barley prices improve a little, this will likely maintain acreage levels to that of 2019, if not potentially increase them.
Good luck out there!
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