Wheat holding strong as most agricultural commodities start to falter, while malt barley decreases
The continued voluntary quarantines and social distancing measures are taking their toll on agricultural commodities, but is not treating all commodities equally. A recent report from the American Farm Bureau discusses the direct link between a drop in demand for livestock and milk products with the closures of restaurants, schools, and universities. The report claims that since January 14, commodity futures for live cattle have decreased by 25%, hogs by 31%, and Class 4 Milk by 36%.
However, there have also been indirect impacts from people adopting voluntary quarantine, layoffs due to business closures, and the rise in working from home. Reduced driving has decreased demand for ethanol to the point that some U.S. plants have stopped production. This is resulting in less demand for corn which has resulted in commodity futures decreasing by 14% over the time frame of the report.
Within this new world where many agricultural commodities seem in excess, wheat stands out as a relative bright spot. Since dropping in early March, wheat prices soon rebounded on the international markets on trade concerns, while the lower Canadian dollar also provided strength through a favourable change in the exchange rate. Since last week, Ukraine has implemented export limits which appear to be a safeguard against the potential of panic purchasing during the ongoing pandemic. As these limits still allow for an additional 2.3 million metric tonnes of exports in this crop year, this export limit has not impacted markets.
As no major international trade issues have occurred yet, wheat prices have since started to decrease, with the exception of durum wheat. Durum wheat appears to be holding strong for now and is a particular bright spot in these unpredictable markets. As of this writing, pricing from PDQ (www.pdqinfo.ca) reports that the weekly change in wheat prices remains mostly stable. Milling wheat prices in southern Alberta have increased by 3 cents per bushel, while the price of durum has decreased by 2 cents.
However, the market outlook for barley is starting to show concerns. According to maltsters, restaurant closures have brought sales of draft beer to a virtual halt, and purchases of canned and bottled beer have settled down to normal levels after a short spike in demand for “pantry stocking”. This drop in demand for beer is reducing demand for malt barley, and resulting in a production slowdown at malt plants to the point that farm barley deliveries are being delayed and prices are starting to fall. Those who are planning on planting malt barley should check with their buyers to make sure they have the most recent updates on prices and what offers are available.
Barley is also facing the prospect of a 2020/21 feed market with ample supplies, as the U.S. prospective plantings suggest that farmers could plant 97 million acres of corn this year. Normally ethanol markets consume millions of tons of U.S. corn per year; however, if quarantines continue and ethanol demand remains low, there could be quite a bit more corn than normal available for animal feed! But remember, there is still lots of growing season ahead of us, and the only guarantee at this point is that markets will be impacted by something unexpected.
Note from Rahr Malting
Government ordered shut downs of bars and restaurants combined with stay at home orders across North America in the battle to fight COVID-19 are and are going to continue to have a major impact on our business which will affect all area of our operations including barley.
There have been 2 stories on beer sales that affect brewers differently:
The draught beer market has come very close to a virtual halt since most of establishments responsible for draught beer sales (bars, restaurants, sports venues, brewery tap rooms, etc.) have been closed.
Packaged beer saw double digit gains for a couple of weeks in August while “pantry stocking” was going in. This benefitted the large brewers but also some craft brewers who had the right packages (larger can packs 12 and up) in place were also able to benefit. That has for the most part gone from the market and we are now settling into sales through what distribution channels are left.
In the near term, we have seen shipments of malt reduced to the point where we are slowing down our production a bit so that we don’t fill up. This could mean further delays to barley shipments unfortunately.
We are staying in touch with our customers to do what we can to help them keep operating through these tough times. Our plant and warehouses have been declared essential operations in all areas that we operate in Canada and the USA.
What can you do to help?First and most importantly, please support our craft brewers in Canada and the USA wherever you are sheltering. Almost all of them are offering limited hours for off sales pickup at the brewery and this would be a really good time to put those Anniversary Growlers we gave out 2 years ago to good use at any craft brewery you might pass on your way for groceries etc. Don’t worry about whether or not they are a Rahr customer or not. We need to support the entire industry today!
Most brewers are also selling brewery merchandise which also goes to helping them keep the doors open while their taprooms are closed.
Most of you may remember Graham Sherman from Tool Shed Brewing in Calgary who spoke at our farmers’ meeting in Trochu in 2015 and told the great story of how their brewery started. At the time they started the brewery, Graham and his partner Jeff started the Golden Growler Club which had a limited number of members who could get many benefits including free beer for life. Graham has opened up a few new spots for our farmers who might be interested in getting one and help support the brewery.If you are interested, drop me a line and I can get you all of the detail.
VP – Sales & Logistics
Rahr Malting Co.
+1 (403) 357-6953