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Aug 18

Bearish market for barley in 2013

Posted on Aug 18 By: Lee Hart

Following above-average barley prices in 2012, analysts are calling for barley feed to come down. As of mid-September, barley prices ranged between $3.07 and $3.61 per bushel.  Credit: Michael Interisano
The worm has turned when it comes to 2013 barley prices after the grain hit near-record prices for malting and feed last year. A new North American supply situation in the malt and feed grains markets is causing prices to tumble heading into the new crop year.

While it may look like a price collapse, with malt barley down from 50 cents to $1 per bushel from 2012 and feed barley down by $1.50 to $2.00 per bushel, some market analysts note this is also a price correction.

“We have to remember that North America was somewhat of an island of high prices last year compared to world barley markets,” said Mike Stapleton with Ag Value Brokers in Calgary. “The world didn’t see the rally in prices like we did here in North America. While the [local] market is down considerably this year, the adjustment is more in line with world markets.”

At the end of August, however, it was shaping up to be a good barley production year in Canada. There was a great crop standing in the field, despite isolated problems.

Cliff Jamieson, Canadian grains analyst with DTN in High River, said Agriculture and Agri-Food Canada had the 2013 Canadian barley crop estimated at around 8.55 million tonnes and he wouldn’t be surprised if it topped nine million tonnes, which is above the five-year average of 8.97 million.

Alberta Agriculture and Rural Development (AARD) rated the barley crop as 87.4 per cent good to excellent at the end of July, as compared to the average, 67.9 per cent.

“Saskatchewan had similar reports, so in August we are looking at a very good crop,” said Jamieson.

With barley production up nationally as well as in Alberta, there was also a better corn crop in the U.S. These are two important factors that weigh on the feed grains market prices, according to Charlie Pearson, AARD market analyst. “

“Some areas of the east side of U.S. corn belt had too much moisture, and it was quite dry on the west side of the corn belt, so these aren’t ideal conditions,” he said. Corn yields in the U.S. were down about 25 per cent due to the 2012 drought, he added.

“They may not hit production of 160 bushels per acre, but they will be better than 120 bushels,” said Pearson. “It has been a cooler season, so their corn and soybean crops are behind, so it will be a later harvest. So much will depend on how harvest goes.”

He also noted that if weather is poor at harvest, it could result in a lot of feed wheat entering the feed grains market.

Along with potential for increased production of feed grains such as barley and corn, Pearson said one other factor that puts pressure on markets is fewer livestock on feed. So demand is down, too. Pearson said barley would likely fall from the highs of $5.50 to $6 per bushel feed barley last winter to the $4 to $4.50 range this fall. He emphasized that Aug.1, the time of his interview, was still a long way from a crop in the bin.

Stapleton said that unless there is a major harvest wreck, he expects prices for feed barley to bottom out at between $190 to $195 per tonne ($4.15 to $4.25 per bushel). And he noted one other factor that could come into play: if corn is in the $4.40 bushel range (about $173 per tonne), and with plenty of Dry Distillers Grain (DDG) in Nebraska and Canadian barley at $195 per tonne, it could result in more cattle leaving Alberta to be fed in the U.S.

On the malting barley side, Rod Green of Central Ag Marketing in Airdrie said August crop conditions suggested there would be a good supply of plump, low protein malt barley to fill maltster contracts this fall.

“Contracts are in the $6 range and it looks like we will have a large crop,” he said. “It is certainly a bearish market this year. Malt barley production appears to have the potential to be up in North America this year.

“On the demand side, the North American market is fairly flat, although demand in the craft beer market is increasing. Asia and China appear to be markets with increasing demand.”

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