Canada: Canadian barley prices grinding lower due to lack of export demand
Western Canadian barley prices have been grinding lower throughout the winter due to a lack of export demand and larger imports of U.S. corn, Canadian Cattlemen reported on May 2.
However, in late March, domestic prices in the non-major feeding regions of Western Canada were competitive with world values. This caused offshore movement to increase and stabilized the downward slide. It now appears that barley exports are increasing and the market looks poised to percolate higher through the spring and summer. For the 2024-25 crop year, supplies will be sufficient to satisfy domestic usage. Therefore, the Canadian barley market will function to encourage export demand. The market in Western Canada will continue to be influenced by world values. Western Canadian feedlot operators will have a competitive advantage over their U.S. counterparts as U.S. corn fundamentals are expected to tighten. In this issue, I’ll provide a brief overview of the Canadian barley fundamentals for the 2024-25 crop year.
Canadian farmers are expected to seed 7.13 million acres this spring according to Statistics Canada. While this is down from the 2023 seeded area of 7.321 million acres, the 2024 area is above the 10-year average of 6.845 million acres. Using a traditional abandonment rate and a yield of 69.1 bu./ac., production has the potential to reach 9.8 million tonnes, up from the 2023 production of 8.9 million tonnes. The 10-year average output is also 8.9 million tonnes. If we add the carry-in stocks along with projected barley imports, total supplies are expected to reach 11.3 million tonnes, up from the 2023-24 starting point of 9.6 million tonnes and up from the 10-year average of 10.2 million tonnes. Most of Alberta and Saskatchewan have received average precipitation over the past 60 days. For the 2024-25 crop year, Western Canada will have large barley supplies.
Looking at the demand, total domestic feed usage is estimated at 5.7 million tonnes, which is similar to the 10-year average. Seed, industrial usage and domestic processing are estimated at 1.2 million tonnes which is also in line with the 10-year average. Our fundamental projection has 2024-25 barley exports at 2.2 million tonnes, resulting in a carryout of 2.2 million tonnes.
The domestic barley market will function to encourage demand by encouraging export movement. For Canadian barley to trade into China, it has to be competitive with Australian origin. To trade into the Middle East or Saudia Arabia, it must be competitive with German origin. Export values from these two countries will determine the price structure in Western Canada during the 2024-25 crop year. Currently, Canadian barley export offers are competitive with Australian export values through December 2024. This is limiting the downside for both old and new crop prices. Australia is always vulnerable to droughts, similar to Western Canada, so cattle producers must watch supply projections from the “Land Down Under.”
Canadian barley production is expected to be up from year-ago levels; however, a year-over-year decrease is expected for U.S. corn output. The USDA’s Prospective Plantings Report had corn acres at 90 million. Using a traditional abandonment rate and a five-year average yield, U.S. corn production has potential to reach 363 million tonnes, down from the 2023 crop size of 390 million tonnes and down from the five-year average output of 365 million tonnes.
During the spring and summer, both the corn and barley markets will incorporate a risk premium due to the production uncertainty. Once the yields are certain, this risk premium will evaporate from the market. Therefore, feedlots must have coverage through to harvest for their barley or corn requirements. Stronger feed grain prices could also take the steam out of the feeder market during the summer.
In conclusion, Canadian barley supplies will be above last year and the 10-year average for the 2024-25 crop year. The market will function to encourage exports by trading equivalent with Australian values into China. Supplies are sufficient to saturate domestic feed demand. U.S. corn production is expected to be down from last year. Corn prices have potential to strengthen. Barley prices in Western Canada will be lower than corn values in the U.S. Midwest and competitive with corn values in Ontario. This will result in lower feeder cattle exports to the U.S. over the winter.
Prices for feed grains during the summer will be extremely volatile; however, Canadian barley supplies will easily saturate domestic feed demand.
Wstecz
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