Barley down in mid-month PROs

Weakening feed grain prices, financial market volatility and “bearish supply-side fundamentals” have bit into the Canadian Wheat Board’s latest 2008-09 pool return outlooks (PROs) for barley.

The mid-month barley PROs, which the CWB says it’s issuing this year to give farmers more timely price signals, see No. 1 CW feed barley (Pool A) drop $22 per tonne from the last PRO on Sept. 25, to $198 on Thursday.

In designated malting barley, meanwhile, PRO values were cut Thursday by $8 per tonne, with Select CW two-row down to $327 per tonne from $335 on Sept. 25, and Select CW six-row down to $307 per tonne.

The PRO, released Thursday, cited declining U.S. corn futures reflecting the weakening price outlook for feed grains overall. Feed barley prices are also feeling pressure from competition from Europe and the Black Sea region, “limited nearby global demand,” and an improved outlook for Australian crops.

“Ocean freight rates are a particularly important variable in international feed barley markets and the dramatic changes in these rates have the potential to change offshore marketing opportunities for Canada,” the CWB wrote.

“Aggressive competition and a much higher exposure to markets outside North America markets leaves the feed barley PRO more responsive to the international market conditions than the designated barley PRO.”

That said, the outlook for grain prices and Canadian grain sales has been thumped by the “volatility in global financial, commodity and equity markets” in recent weeks, the CWB said.

Ocean freight rates have dropped “dramatically” in recent weeks, the CWB said, and while lower rates support offshore customer demand, they may also change the “competitive dynamics” between barley exporters.

A weaker loonie may also help support malting barley sales in some markets, but the euro and the Australian dollar have also weakened relative to the loonie, the CWB said. That in turn may give an edge to Canada’s two biggest competitors in the barley market. Australia is reporting an “average” barley crop while European exporters are reported to be selling aggressively.

Global prices for malting barley have weakened further in the past two weeks on financial market volatility, “but also in response to bearish underlying supply-side fundamentals,” the CWB said.

The “advanced sales position” of the CWB pool has kept the PRO “partially insulated” from such a dramatic market decline, the board wrote.

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