(Resource News International) — Barley values in Western Canada have
reluctantly followed U.S. corn prices upward, but the divergence
between the two has been steadily growing due to demand factors,
according to industry participants.
“Barley at today’s value is, without a doubt, a good price
based on a historic standpoint. However, in comparison to U.S.
corn, the value has widened out considerably,” said Mike Jubinville,
a Winnipeg analyst with the farmer advisory service, ProFarmer Canada.
There is a relationship between corn and barley as a
general have caused both prices to work their way higher.
“But U.S. corn prices are also caught up in an emotional
explosion and the upward move of that commodity is outpacing the
gains in barley,” Jubinville said. “The price rise in U.S. corn is
essentially a mission to clamp down on demand, as supplies will
otherwise run out this crop year.”
Concerns about supplies of corn in the upcoming crop year
also have helped to fuel the price gains.
U.S. corn is now doing what U.S. wheat values did
during the winter, he said.
Pressures on barley
However, feed barley values in Western Canada were facing a
number of elements which were preventing prices from staying
parallel to U.S. corn.
One of the factors working against higher barley values in
Western Canada was the pending harvest of a large winter barley
crop in Europe, Jubinville said.
“There are going to be large supplies of barley coming out
of the former Soviet Union, including Kazakhstan, Ukraine and
Russia, in the very near future,” he said.
Another factor in play, limiting the upside in barley
values, is the current downsizing of Canada’s livestock herd,
including cattle and hogs.With fewer mouths
to feed, the demand for rations has been declining, Jubinville said.
Additionally, with wheat prices falling, Canada has a lot of
mid-quality wheats, such as CPS and winter wheats, which can also
be used in the domestic feed sector, he said.
“With the price decline in those types of wheats, they have
become more competitive with barley for Canada’s limited feed
market,” Jubinville said.
“Essentially what has happened is the demand element for
barley has been eliminated to some degree, and has prevented
barley values from rallying the same amount as U.S. corn,” he said.
Barley values in Western Canada, however, were not expected
to fall significantly either, as tight 2007-08 supplies and
expected declines in 2008-09 barley production will prevent such
Western Canadian end-users in the past have imported U.S. corn
when prices for feeds have ballooned past reasonable. However, it
was unlikely end-users in northern-tier U.S. states would look at
bringing in Canadian barley to help offset the high cost of U.S.
corn, one export source said, not wanting his name used.
“If the price incentive was there, the end-users in the U.S.
would certainly give that notion some consideration,” the source
said. However, prices need to be at a level where it makes
economic sense to do so.
“If the U.S. user could buy western Canadian barley for the
cash price that is currently available, they would probably do
so,” the source said. “However, because the Canadian Wheat Board
attaches a premium to those sales, it effectively snuffs out that