Fact: Too much malt barley supply in the markets is keeping barley prices deflated.
And each swig of the barley sandwiches likely won’t make much of a difference.
If you don’t know what a barley sandwich is, maybe you’re
There’s just too much supply in the barley market.
Having chatted with several major malt barley buyers across North America over the past few weeks, I have found that supply and quality are not an issue this year.
I’ll explain why in a minute…
But first, a bit of context.
The American Barley Market in 2017/18
Who’s interested in malt barley in the U.S.?
Earlier this year, both Anheuser-Busch and MillerCoors announced plans to significantly lower the amount of malt barley they would buy in Montana. Depending on whom you spoke with, this number was up to a 60% reduction in forward-contracted acres from the 2016/17 procurement plan.
The reason for this cut?
“The past two growing seasons have resulted in large volumes of high quality barley”, said Anheuser-Busch’s VP of Raw Materials.
You could easily say, “That’s bullshit.”
But the truth is, we faced a market correction. There was too much supply.
And too much supply doesn’t automatically create more demand. As such, prices fall.
It’s a simple equation.
When the supply-demand imbalance is this off-kilter, farmers cut back on acreage.
In 2017, the USDA estimates that American farmers planted just fewer than 2.5 million acres of barley.
That’s almost a 20% decline from 2016 and a 26.5% departure from the five-year average.
Given some of the dry growing conditions in 2017 in major barley producing regions – the Northern Plains – it’s estimated that fewer than 2 million acres will get harvested.
Despite tougher growing conditions, analysts project that average U.S. barley yields will decline by 7% from 2016 to 72.6 bushels per acre.
That’s slightly above the 5-year average.
With that in mind, the lower acreage is the main reason by U.S. barley production will fall by almost 30% from last year and the 5-year average.
In 2017/18, American farmers will combine 3.09 million tonnes of barley.
The Canadian Barley Market in 2017/18
On the other side of the 49th parallel, analysts expect Canadian production to decline from last year.
In 2016, Canadian farmers had a great barley crop of 8.8 million tonnes off 6.4 million acres planted with the cereal.
In 2017, however, acres planted to barley in 2017 will likely decline by 10% to 5.77 million. That figure is more than 13% below the 5-year average of 6.66 million acres.
This year, farmers seeded nearly two-thirds of all barley acres with malt varieties.
The USDA thinks that final harvested acres in the Great White North will only register at 5.2 million.
Further, average yields are forecasted at 64.1 bushels per acre in 2017/18. The 5-year average is 67.3 bushels per acre, and last year, an average of 73.6 bushels per acre were taken off.
This means Canadian barley production will fall to 7.25 million tonnes in 2017/18. That figure is an 18% decline from 2016 and 13% below the 5-year average.
It’s worth noting, however, that the USDA’s Ottawa attaché recently hiked its own estimate to 7.6 million tonnes. 
They’re expecting a little more than 2 million tonnes to go into the malt market. While farmers seeded two-thirds of acres for malt barley, less than one-fourth are rated and sold for malt quality.
The Canadian Grain Commission does note though that only about 20% (or 1/5) of malt barley production in Canada actually makes it into the malt market.  About 10% of the crop goes into the food market, while the remaining 70% tends to into livestock feed markets, either domestically or abroad.
Malt Production Overbearing on Demand, Barley Prices
Cash malt barley prices in North Dakota are sitting anywhere between $2.25 and $3.00 USD per bushel.
The lowest prices are found closer to the Canadian border.
In Western Canada, prices are sitting anywhere between $4.00 and $4.75 CAD per bushel. We have seen are few reports of buyers having $5.00 specials that seem to be more “coffee row buzz” than anything.
Simply put, it’s a buyer’s market.
Whether it’s barley crop from West Central Saskatchewan to Central Alberta or even down into the Golden Triangle in the U..S Northern Plains, quality is not a concern.
Malsters, exporters, and brokers will reiterate this time and time again.
And because demand has softened a bit, this new price equilibrium is being found.
In Canada, this range falls below $5.00 CAD/bushel. In the US, it’s below $3.00 USD/bushel.
As we start to think about 2018/19 acreage, my guesstimate is that acres will be lower again.
Sure, feed barley prices have been okay, but why try and grow malt if there’s less of a chance you’re going to get paid for it?
How to Play Malt Barley & Feed Barley Today
Ultimately, we think selling feed barley is not a bad idea right now.
Post a block on the FarmLead Marketplace and you can earn a price not seen in nearly two years.
If you DO you have malt barley quality but are short on cashflow, consider selling a truck or two into the feed market.
You’re really going to have to weigh two factors: where barley prices are at today and the likelihood they go up or down.
Feed barley prices are at multi-year highs. Meanwhile, malt barley prices are at multi-year lows.
The likelihood that malt barley prices improve is not high given buyers’ contentment with the current supply pipeline. We might see a bit more strength in the first quarter of 2018…
But that’s highly debatable as again, supply is strong.
On the flipside, given the size of the large U.S. corn crop, we’re already seeing a lot of U.S. corn head north into Canada.
This trend puts downward pressure on feed barley prices.
Feed barley is one of those highly substitutable crops for things like feed wheat, corn, soymeal, etc. thus at a certain point, a cheaper feedstuff becomes available and the market is less interested in the most expensive option.
If you are going to wait around to see if there are better malt barley prices in the future, make sure your product is up to snuff. Get your germ, chit, and other required specs tested through GrainTests.com.