What a difference a year can make! Big yields in many of the key grain-and oilseed-producing countries have pressured prices for several months. Total world grain and oilseed production is up about eight per cent while barley production will actually be down 10 million tonnes to 135 MT. However, two big U.S. corn crops in a row and increased supplies of feed wheat have steadily eroded feed values with December corn futures hovering around $3.50 per bushel.
Australia has generally received enough rain in the major barley growing areas to establish an average crop. Barley is a winter crop and they do need finishing rains soon to avoid yield loss when the temperatures rise significantly in the spring (October/November). The states of Queensland and New South Wales are still suffering from a prolonged drought although beneficial rains have stabilized the situation over the past two months. This should keep domestic feed values relatively firm in eastern Australia and may limit their feed exports.
The Australian barley crop is projected at 7.5 MT versus 9.5 MT last year. Australian new crop No. 1 grade malting barley is currently quoted at US$290/tonne FOB. This is about $4.85/bu. in Canadian dollars at the farm gate in western Saskatchewan.
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Australia is the largest supplier of malting barley to China, the world’s biggest importer. If they harvest a good quality crop, Aussie malting offers can go lower. Their faq (fair average quality) quotes are near US$250 FOB and feed quotes are near $US240 FOB ($50/tonne less than No. 1 malting) and a significant premium to our domestic feed. However, Canada’s ability to maximize offshore sales of feed and malting will continue to be limited by rail and Vancouver terminal capacity constraints, and better margins handling wheat.
Other growing regions
The seeded barley area in Argentina is down significantly due to better returns from wheat. Barley production is forecast at 3.5 MT versus 4.7 MT last year. Rains also reduced area and have caused some quality concerns (in Uruguay as well). It is expected that barley exports from the surplus countries of Argentina and Uruguay to non-South American destinations will be minimal. Colombia and Brazil are the two main importers. Indicated values are US$295/tonne FOB for malting and US$210/tonne FOB for feed.
The EU crop and Black Sea (Russia/Ukraine) crop will more than make up for lower production in Australia and Argentina. The EU barley crop exceeded yield expectations and production will reach 58 MT. The quality of the winter six-row crop (from France primarily) was excellent with quotes currently near US$230/tonne FOB. The two-row crop was more of a mixed bag. It is currently quoted near US$270/tonne FOB.
With plentiful supplies, the EU has been very active selling new crop barley. Total EU barley export licenses for 2014-15 have reached 1.6 MT versus 2.3 MT one year ago. This attests to the overall bearishness of world feed markets as buyers have access to huge corn supplies and increased feed quality wheat. Of perhaps even greater significance is the large Black Sea crop (Russia at 19.6 MT plus Ukraine at 8.4 MT which is a combined 5.0 MT more than 2013). This will definitely weigh on feed barley values which, for the remainder of the crop year, are unlikely to exceed US$200/tonne FOB ($2.50-2.75/bu. in western Saskatchewan). In fact, feed barley bids may well go lower as cattle feeding economics favour the U.S. and corn dried distiller’s grains with solubles (DDGs) will further pressure North American feed markets since exports to China may be non-existent.
Lethbridge cash feed trades have eroded steadily from $185/tonne last fall and a high of $218 in May to $165/tonne currently. The large crop last year had difficulty getting to export due the rail logistical issues and the bigger margins that handling companies could make on wheat and canola. For a period last winter, offshore feed values were at a premium to domestic values but the logistical problems prevented additional barley exports.
The Canadian carryout this year is 1.9 MT versus 1.2 MT last year. The FOB Vancouver equivalent of our domestic bids is only US$200/tonne. Current country bids for malting barley are over $5/bu. due to short covering and quality concerns due to our recent rains.
At the time of writing, about 25 per cent of the barley has been harvested. Recent rains and frost are causing considerable concerns about quality. Rains in the U.S. have also downgraded much of their crop. So North American demand for malting barley may be strong with traded values well above world values and at a premium of $2.75/bushel or more over feed.
2013 was an exceptional year, in terms of both yields and quality. The protein was below average but otherwise, quality (plump, colour, germination, etc.) was excellent and the selection rate for malting was well above average.
CDC Meredith was overproduced in 2013, which resulted in supply well exceeding demand. That was unfortunate as CDC Meredith is a good variety. There has been increasing demand for CDC Meredith in China but time will tell as to how much this demand will grow.
The preference in offshore markets is still for CDC Metcalfe first and CDC Copeland second. Newdale has established a limited domestic demand but shows limited offshore potential.
Other newer varieties such as Bentley, CDC Kindersley, Merit 57 and Major have had some domestic acceptance with Bentley and CDC Kindersley showing the most promise. As AC Metcalfe and CDC Copeland are replaced with new improved varieties, there may not be any one dominant variety. The industry will need to work to promote the best new varieties to gain acceptance by our customers, rather than companies just promoting the varieties they have a vested interest in. As always, with newer varieties, it is highly recommended that growers sign a production contract prior to seeding.
Canada’s barley industry needs to be very concerned about current trends. Logistical constraints have been a factor in limiting barley exports. Also, grain terminals generally do not like handling malting barley as it slows the through-put.
With the resulting negative impact on movement and the declining domestic feed demand, feed barley is not an attractive cropping option. Malting barley is generally competitive with other crops but farmers carry the quality risk. Therefore, the future points to Canadian barley seeded area continuing to decline. This will result in a shrinking supply base for our maltsters to select from, which increases their risk.
Canada appears to be heading in the same direction as the U.S., which exports only small amounts of barley and where the maltsters have to contract most of their requirements with farmers prior to seeding. However, a large percentage of U.S. malting barley is produced under irrigation and usually with much lower harvest weather risk. Canadian maltsters could incur a greater supply risk than their U.S. counterparts.
Editor’s Note: This article originally ran without the notations CDC applied to Meredith, Kindersley and Copeland barley varieties, and without the descriptor AC applied to Metcalfe barley. We apologize for this error, and understand the importance of public breeding programs.