Malt barley supplies large ahead of new crop year

CNS Canada –– After seeing record yields in 2013, Canada could still be holding onto enough malt barley to supply the domestic industry for an entire year at the end of the current crop year.

Those large supplies are cutting into prices, but buyers will still need fresh stocks due to germination issues, and may yet need to up their bids in order to draw in enough acres in 2014-15.

Canadian barley supplies at the end of the 2013-14 crop year are forecast at 2.5 million tonnes by Agriculture and Agri-Food Canada, which would compare with a carryout of only 810,000 tonnes the previous year. While it’s unknown how much of that barley surplus will be considered malt quality, roughly a third of the 10.25 million-tonne barley crop grown in 2013-14 hit malt specifications, according to industry participants.

In theory, there should almost be enough malt barley left over to supply the entire Canadian yearly demand of 900,000 tonnes, said Darren Smith, managing partner with RMI Analytics in Calgary.

However, in actuality those old-crop supplies will start to lose germination in early 2015 and more production is still needed, he added.

Both spot bids and new-crop pricing opportunities are currently working out to C$210-$225 per tonne for malting barley in Western Canada, which is not generating much interest with producers, said Smith. At those levels, Canadian barley is priced at about an average of $30 to $40 below where European barley is trading.

“Ultimately the maltsters will have to increase their bids, if they want more acres,” said Smith.

In the U.S., maltsters are contracting at US$5.50-$6 per bushel (US$250-$275 per tonne), said Smith, noting there will definitely be demand for Canadian malt barley from malt houses close to the border.

The U.S. craft beer industry continues to grow, he noted, with a recent report from the Brewers Association pointing to an 18 per cent increase in production over the past year. The U.S. demand is especially for two-row malting barley, which is generally lower-protein and favours Canadian barley, said Smith.

In the current market, if farmers are choosing between barley or wheat as a cereal crop for their rotations, they will lean toward wheat this year, said Smith.

Newer varieties

For the malt barley that’s seeded, some of the newer malt barley varieties, such as Meredith and Bentley, are yielding 10 to 15 per cent higher than Metcalf.

Farmers want to grow Meredith because of better yields, but the maltsters still have not convinced the brewers that Meredith is the right variety, said Smith.

As a result, Metcalf will command a premium this year, although he expected that premium would fade over the next couple of years as end-users become accustomed to newer varieties and farmers push for their usage.

Canadian farmers seeded 7.1 million acres of barley in 2013, with roughly half of that total likely going to malt varieties. Total barley production came in at 10.24 million tonnes, with maybe 3.2 million hitting the malt specifications when all was said and done, according to industry participants.

Agriculture and Agri-Food Canada is now forecasting barley area in 2014 at 6.7 million acres, with a return to average yields, leaving production at an estimated 8.25 million tonnes.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.


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