Cash barley values in southern Alberta have softened over the past month as feedlot bids range from $195 to $198, which is down from the highs of $210 earlier in spring. I’ve had many inquiries from feedlot operators in regards to the price outlook for the 2011-12 crop year. At this time, there are still many uncertain factors influencing the upcoming price structure. Acreage is still uncertain due to excessive moisture in southern Saskatchewan and Manitoba. Secondly, the domestic wheat crop was seeded two to three weeks behind normal which could result in larger feed wheat supplies if an early frost occurs. Finally, the U.S. corn crop size will influence prices of corn and DDGS which will determine the amount of imports into Western Canada. Despite these three risk factors, I’m going to discuss the barley outlook for the upcoming crop year.
Statistics Canada estimated the barley crop at 7.1 million acres on their June survey; however, actual harvested acres will come in closer to 6.1 million. Using an average yield of 59 bushels per acre, Canadian barley production will finish near 7.8 million mt. Unlike last year, the beginning stocks are historically small at 1.2 million mt; therefore, total barley supplies for 2011-12 are estimated at 9.1 million mt, down from 10.2 million mt in 2010-11.
Given the lower supplies, the domestic market will ration demand away from export channels. Therefore, local cash barley prices will remain above export prices. At the time of writing this article, the most recent Algerian barley tender was concluded at US$290 per mt cnf which equates to $150 per mt in central Saskatchewan after backing off all the freight and handling costs. Notice domestic feed usage is projected at 6.0 million mt, which is down from the 10-year average of 8.3 million mt. Alternate feed sources will need to fill in the void from feed usage. The 2011-12 carry-out is estimated at 1.2 million mt, which is similar to 2010-11 but down from the 10-year average of 2.3 million mt.
During the 2010-11 crop year, the Russian cereal grain export ban resulted in relatively high world feed wheat prices. Farmers in Western Canada were encouraged to sell feed wheat through the CWB as export values were premium to the domestic market in most regions of Western Canada. In 2011-12, Russia will export 15 million to 20 million mt which will saturate feed wheat demand. I expect Canadian domestic feed wheat prices to trade at a premium to export values causing farmers to sell the bulk of their feed wheat locally. This is a major fundamental shift compared to last year.
Higher U.S. feed grain prices due to the tight corn fundamentals resulted in limited Canadian imports of U.S. corn and DDGS. Manitoba was feed deficit during 2010-11 causing barley prices in the Red River Valley to trade at a $20 premium to southern Alberta. Barley and feed wheat in central Saskatchewan moved east into Manitoba instead of into Alberta feedlots. The feed grain deficit in Manitoba will be larger in 2011-12 in comparison to 2010-11 due to the large area that was unseeded in southern Manitoba and southeast Saskatchewan. This abnormal trade flow pattern will continue because prices in Manitoba will remain premium to Alberta.
Given the current environment, the price outlook for barley is rather neutral. Tight supplies will keep prices at the higher levels but we will see larger feed wheat consumption limiting the upside. At the time of writing this article, corn prices were expected to stay above $5.50 per bushel in the U.S. Midwest causing limited exports into Western Canada.
GeraldKlassenanalyzesmarketsinWinnipegandalsomaintainsaninterestinthefamilyfeedlotinsouthernAlberta.Hecanbereachedat [email protected] or204-287-8268.