Total barley production across the Prairies was down by 10 per cent on the year, at 8.707 million tonnes, according to the CGC. Average barley yields were placed at 61.3 bushels per acre in Western Canada, which was down from 70.5 bu./ac. the previous year and the 10-year average of 66.4 bu./ac.

AAC Synergy was the most popular malting barley variety seeded in Western Canada, while the area seeded with CDC Copeland continued to decline. The popularity of newer varieties, such as AAC Connect, CDC Fraser and CDC Churchill, increased noticeably, according to the CGC.

The malting barley was generally of good quality, with average protein levels steady on the year at 12.3 per cent. That compares with the 10-year average of 11.9 per cent.

The average test weight was 65.0 kg/hL, which was lower than the previous year’s average (66.7 kg/hL) and the 10-year average (66.9 kg/hL). The average 1,000 kernel weight was 46.8g, which is higher than last year’s average (45.0g) and the 10-year average (45.7g).

The newer varieties, such as AAC Connect, AAC Synergy, CDC Fraser and CDC Churchill that have kernels larger than AC Metcalfe and CDC Copeland, contributed to the overall high average kernel weight.

Soil moisture and precipitation were lacking in many areas through the growing season but a stretch of relatively cooler temperatures during a portion of July helped relieve some crop stress, as did haze from wildfire smoke, according to the report. Harvest operations started relatively early in August, as crop development was ahead of normal across a good portion of the Prairies due to the hot and dry conditions throughout much of the season. Occasional rain in August did lead to some sprouting and prevented the harvest from being completed in a timely manner.

— Phil Franz-Warkentin is an associate editor/analyst with MarketsFarm in Winnipeg.

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“As the winter continues to hang on, cattle producers are continuing to have to feed (grain) until they can get their cattle out to pasture,” said Glen Loyns, general manager with JGL Commodities in Moose Jaw, Sask., noting barley markets were seeing some strength as a result.

However, while the demand is there, “farmer participation is not,” he added.

“With the long, extended winter we’re having, guys are just holding onto it for better pricing,” he said, pointing to uncertainty over new-crop production.

“Prices aren’t going down anytime soon.”

Barley in the key feeding area of Lethbridge has moved steadily higher over the past few months, with current bids in the $245-$248 per tonne area, according to government data.

However, additional advances in feed grains may also be hard to come by.

Loyns estimated there was still plenty of unpriced barley in the countryside, despite the aggressive export program this year. Corn imports from the U.S. and Manitoba are another factor keeping a lid on values.

Looking ahead to spring seeding, the solid feed pricing should encourage some acres.

In addition, “as the winter continues to hang on, there’s a higher probability of barley going in the ground because of the shortened growing season,” said Loyns.

While conditions can change quickly at this time of year, he added there were still two feet of snow in some of the northern growing regions.

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

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Reason 1: The loss of these contracts gives you one less tool to use to determine fair market values for your grains, or to take advantage of price spikes in futures markets.

Reason 2: Futures contracts allow you to lock in prices that suit you, as opposed to letting a grain company make sales, set the basis, then determine what they will offer.

Reason 3: Trading futures allows you to secure a price on paper, with no need to set a basis or lock in a delivery contract until much later. This gives you time to find the best basis and/or grade for your grain once it’s in the bin.

The purpose of a futures contract is to establish a fair market price for a specific delivery period. For a futures contract to trade, you need willing buyers and sellers. If all you have are sellers and no buyers or vice versa, or only a limited number of either, it is hard for a futures contract to function properly. This leads to fewer participants using the contract, until eventually no trades can be made and the contract closes.

Canola futures trading on the ICE contract has grown steadily over the years, but initial uptake and growth was slow when the contract was first introduced. All of the players involved were, no doubt, a little reluctant to use the futures at first, but over time volumes grew and the contract became a viable way for buyers and sellers to transact.

The growth and expansion of the canola crush industry in Western Canada over the past 25 years and the use of the futures contracts by canola crushers to hedge their purchases and sales was no doubt key to canola contracts remaining viably traded.

Use it or lose it

Were you using these wheat, durum and barley contracts? What about durum growers? With the durum futures contract you finally had a way to lock in prices on a commodity that has always been a sale-by-sale cash-traded grain, where all of the pricing decisions were in the hands of buyers and grain companies.

Spring wheat and barley producers still have the Chicago and Minneapolis futures but for durum producers, the ICE contract was the only futures contract in North America. Now that it is gone the chance that it will ever be brought back is likely slim to none.

I hope these contracts didn’t fail because there wasn’t enough interest from sellers (farmers). If that is the main reason these contracts closed, farmers have only yourselves to blame for losing this tool.

Grain marketing has gone digital. New marketing companies are offering online services where buyers and sellers can negotiate prices that are posted publically, creating transparent market pricing systems that anyone can use. This is a good step forward, as it gives producers and buyers a way to transact business directly.

These sites give producers a place to see actual selling prices for specific grains. This can help them maximize sales, either on one of these sites or to a feeder, mill, crusher or grain company. These sites bring transparency to local cash markets, but they don’t give farmers an opportunity to take advantage of futures rallies like futures or options contracts do.

Another change that could provide competitive marketing solutions would be for more Prairie grain companies, crushers and millers to offer you the ability to lock in futures and/or basis-only deferred delivery contracts at any time of year. A few companies do offer these contract options; find out which ones they are and what types of contracts they offer so you’re prepared to use them when the time is right.

There is no reason all grain companies shouldn’t be able to offer you this kind of contract option. When you’re talking to your grain buyer, ask if they offer these kinds of contracts. If the answer is no, ask why. Tell them you need pricing flexibility for your farm, and if they want to buy grain from you they need to offer you these kinds of contracts.

Separating the timing of pricing the futures and basis on your grain contracts let you decide when to price your grain and for how much.

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“This year all we’ve seen is a $5 to $10 per tonne move higher,” said Jim Beusekom, analyst at Market Place Commodities. “So it’s pretty minimal this year.”

Feed barley prices in Lethbridge are trading between $210 and $215 per tonne for shipment in May/June.

One reason for the lacklustre rally is mediocre demand from feedlots, said Jared Seitz, director at Agfinity Inc.

“There’s less usage than before, and maybe that is because some of the buyers are a little gun-shy from what happened last year,” Seitz said.

Since becoming comparatively less profitable, feeders don’t seem to be taking on as aggressive of an operation this year, he said.

Feedlots that need barley have already bought the grain they need for up until June, which is also stopping prices from gaining.

Feedlots are able to buy feed barley as they need it, Beusekom added.

“There just wasn’t really the difficultly moving grain this year that there normally is,” Seitz said.

Most shipments this year went as planned, he added, and few buyers were caught without grain.

There’s also more grain around this year, compared with year-ago levels, which is further keeping a lid on prices.

On-farm and commercial stocks of barley were at 3.813 million tonnes as of March 2016, compared with 3.402 million tonnes in March 2015, according to Statistics Canada data.

“There’s a little bit more barley than there was last year, demand is down, loading conditions have been good, so nothing that could work in the farmer’s favour,” Seitz said.

But on the upside, Beusekom said, dryness concerns across parts of the Prairies have allowed the market to hold steady, but haven’t provided enough support to allow the market to rally.

Seitz said those concerns will need to be amplified going into the summer to have any significant effect on prices.

“With that kind of set up there’s just really no chance for the market to rally,” he said.

— Jade Markus writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow her at @jade_markus on Twitter.

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Federal officials on Monday confirmed negotiations have concluded on the multilateral Trans-Pacific Partnership, now billed as “the largest, most ambitious free trade initiative in history.”

The agreement commits Canada to pull back or remove tariffs for products from Japan, Australia, Malaysia, New Zealand, Singapore, Vietnam and Brunei Darussalam — as well as for Canada’s existing free-trade partners, the U.S., Mexico, Chile and Peru — while granting new access for Canadian wares in all 11 markets (see below).

For Canadian beef, pork, wheat, barley, canola, wine and whisky producers, a TPP deal means either tariff elimination or more market access to Japan, Malaysia and Vietnam, whose agricultural tariffs on Canadian product now average 17.3, 10.9 and 17 per cent respectively.

Canadian dairy, poultry and egg producers and processors can also expect more duty-free access to the U.S. and other TPP countries, the government said, noting “complete tariff elimination” on artisanal cheese and certain other specialty cheeses bound for the U.S.

Canada, meanwhile, has pledged “limited new access” in goods now covered by supply management, to be granted via quotas phased in over five years.

The new access, the government said, represents “a small fraction of Canada’s current annual production” — 3.25 per cent for dairy, mainly in milk and butter for value-added processing; 2.3 per cent for eggs; 2.1 per cent for chicken; two per cent for turkey; and 1.5 per cent for broiler hatching eggs.

Canada’s supply-managed producers in return will get a new Income Guarantee Program, which the government said Monday will protect those farms’ incomes against increased access for imports granted through both the TPP and the Canada/European Union free trade agreement (CETA).

The program is expected to provide “100 per cent income protection” to affected farms 10 years from the day the TPP comes into force, then more support on a “tapered basis” for another five years afterward.

The Income Guarantee Program, budgeted for $2.4 billion over those 15 years, would grant a typical dairy producer about $2,087 per cow in total; a chicken farmer, about 35 cents per chicken; a turkey farmer, about 24 cents per kilogram (live weight); an egg farmer, about $3.15 per layer hen; and a hatching egg producer, about seven cents per egg.

The government also announced a “demand-driven” Quota Value Guarantee Program, which is to protect producers against reduced values in quota is sold after the TPP is implemented.

The government said the program, worth $1.5 billion over 10 years, will ensure farmers’ banks and other lenders are secure in continuing to use quota as collateral for loans.

Those programs remain to be finalized with the Canadian Dairy Commission and the Farm Products Council of Canada, the government said.

Related programs announced Monday include a Processor Modernization Program, worth $450 million, to “further advance… competitiveness and growth” of processors in supply-managed sectors.

Supply-managed groups will also get a new Market Development Initiative, worth $15 million added to the AgriMarketing program, to assist them in “promoting and marketing their top-quality products.”

The government also pledged to plug other holes in Canada’s tariff wall through stronger “anti-circumvention measures” such as certification for spent fowl; preventing importers from circumventing import quotas by adding sauce packets to chicken products; and excluding supply-managed products from the federal Duties Relief Program.

Cheese compositional standards Ottawa introduced in 2008 have also been maintained, the government said.

Market access

The TPP deal as agreed upon Monday commits Japan to eliminate almost 32 per cent of its duties on farmed and agri-food products when the deal comes into force; another nine per cent of tariff lines will be get preferential treatment through permanent and “country-specific” quotas for Canada.

Japan’s remaining tariff lines will see tariff elimination or reductions over up to 20 years.

Vietnam will end tariffs on close to 31 per cent of its farmed and agri-food product tariffs when the TPP comes into force, and another 67 per cent of its tariff lines will become duty-free within 15 years, with preferential treatment for others.

Malaysia will end tariffs on nearly 92 per cent of its tariff lines for farmed goods and agri-foods when the TPP comes into force and end another seven per cent of duties within 15 years.

Australia and New Zealand, meanwhile, have pledged eliminate nearly all their tariffs on agriculture and agri-food products when the TPP comes into force, and remaining duties will end in five years or less.

Pork: Canadian pork bound for Japan will see that country’s “over-gate” price tariff of 4.3 per cent on fresh/chilled/frozen pork cuts and pork offal end within 10 years, and Japan’s “under-gate” tariff of up to 482 yen per kilogram cut to 50 yen/kg within 10 years. Over-gate price and below-gate price tariffs will also end within 10 years for preserved and processed pork.

Japan’s tariffs of up to 20 per cent on pork products, including sausages, not subject to the gate price system will also end within 10 years.

Fresh, chilled and frozen pork going to Vietnam from Canada will see tariffs of up to 27 per cent, and tariffs of up to 31 per cent on all other pork products, including sausages, eliminated within nine years.

Beef: Japan’s tariffs of 38.5 per cent on fresh/chilled and frozen beef, and 50 per cent on certain offal, will be cut to nine per cent within 15 years. Its tariffs of up to 50 per cent on processed beef and most offals will end within 15 years.

Vietnam’s tariffs of up to 31 per cent on fresh/chilled and frozen beef will end within two years, and its tariffs of up to 34 per cent on all other beef products end within seven years.

Wheat and barley: Feed wheat bound for Japan will be duty-free and quota-free when the TPP comes into force. Canada will also get a “Canada-specific” quota for food wheat, starting at 40,000 tonnes and rising to 53,000 tonnes within six years. Markups within that country-specific quota will be cut by 45 or 50 per cent.

Vietnam’s tariffs of up to five per cent on all wheat will be eliminated upon entry into force.

Food and feed-grade barley bound for Japan fall under a quota system with markups. Feed barley in Japan will be duty-free and quota-free when the TPP comes into force; Japan’s mark-ups on the price of food barley will be cut by 45 per cent within eight years.

Canada also gets a TPP-wide quota for food barley, starting at 25,000 tonnes and growing to 65,000 tonnes within eight years.

Canola oil: Japanese tariffs on canola oil, now up to 13.20 yen/kg, will be eliminated within five years, as will Vietnam’s tariffs of five per cent.

Wine and spirits: Canadian wine, icewine and sparkling wine will see Japanese duties of up to 182 yen/litre end within seven years. Vietnam’s duties of up to 59 per cent would end within 11 years and Malaysia’s duties of 23 ringgit/litre within 15 years.

Australia and New Zealand have both agreed to end their duties of up to five per cent on Canadian wines immediately when the TPP comes into force; Australia’s five per cent duty on Canadian whisky would also end at that time.

Malaysia’s duties of 58 ringgit/litre on Canadian whisky are to end within 15 years, as are Vietnam’s duties of 55 per cent will be eliminated within 12 years.
In Australia, duties of five per cent will be eliminated upon entry into force.

Canada said the TPP deal will also end or cut many of the TPP nations’ existing tariffs, or create tariff rate quotas, on Canada’s exports of processed foods and non-alcoholic beverages including maple syrup, baked goods, processed grain and pulse products, and sugar and chocolate confectionery. — AGCanada.com Network

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“This recent rally in corn has helped barley and feed wheat move higher; we’re in a market driven by corn, which leads us to believe that the ending stocks in barley are low enough that corn matters,” said Allen Pirness of Market Place Commodities in Lethbridge.

Feed barley was sitting around the $220 per tonne mark early last week when the rally in corn pushed it up into the $250s.

“We’ve seen some stuff trade as high as $260, for this crop year,” said Pirness. He added he wasn’t sure of prices in Vancouver, but suspected that domestically, feed barley is at higher values than on the export market.

He said he’s heard of some feedlots that are already bringing in corn to offer buyers, and estimates it could be delivered into lots around $270-$275 per tonne — extremely close to barley values.

“Nutritionally, corn has a premium value to barley because (corn) has more energy,” he said.

Recent moisture is also helping to alleviate some of the pressures facing feed barley, he added.

“Weekend rains and cooler weather have kind of turned the tide a little bit, maybe we’ve seen the top of it; corn is down a dime today so maybe we’re seeing things roll over a bit,” he said.

In Montana, barley continues to be shipped north from malt growers in the state who wound up with a lot of poor-quality acres last year.

“They’ve been moving barley north all crop year,” said Pirness.

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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“We’re two weeks ahead here in southern Alberta, there’s guys that have wrapped up; they’re done seeding already,” said council president Brian Otto.

On his own farm at Warner, Alta., southeast of Lethbridge, Otto said conditions are good enough that he plans to begin seeding sometime this week.

The situation is similar in many parts of Saskatchewan — a far cry from last year, when seeding was delayed due to wet weather.

While Statistics Canada has pegged 2015 barley acreage as 6.5 million acres, Otto said he believes it could turn out to be slightly more, “maybe 6.4 (million) or 6.8, something like that,” if the weather stays favourable. Canadian farmers seeded 5.4 million acres in 2014.

“We got moisture to get things started, but we’ve had days of wind, so our ground is getting crusted, so we’ll need some rain here in the next couple of weeks for sure.”

Malt prices have stayed largely in the $5.50-$6 per bushel range over the past few years, according to Otto, and he expected that to remain the case.

He has already signed a contract with a major maltster for his acres, a practise that generally becoming the norm.

“For anybody growing malt barley, we like to have our contracts signed with maltsters with pricing in place. We’ve had contracts signed before we put a kernel in the ground,” said Otto.

He said he’s seen a bit of an uptick in new-crop contracts over the past week, which is a good sign.

Most of the crop going into Western Canada’s fields will be two-row varieties and should be good enough to qualify for malting purposes, Otto said, but even if it’s downgraded to feed, there should be buyers for that too.

“The feed market is holding up very well. I think the barley industry is looking healthy,” he said.

As for export sales, Otto said offshore markets for Canadian barley look to remain steady this year, both for feed and malt supplies, and “we would be on an average for barley exports right now.”

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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“The current barley futures contract is based on our very successful canola contract,” says Brad Vannan, president and chief operating officer of ICE Futures Canada. “The canola contract functions very well and has grown rapidly over the last six years and to base the changes needed on a successful contract just made sense because both crops utilize the same storage and transportation infrastructure.”

The new barley futures contract was created to meet the potential markets needs within the prevailing conditions in Western Canada. “Among the biggest changes in this new contract is a move away from a pricing point in southern Alberta to a supply point in central Saskatchewan, which expands the contracts’ potential utility across a broader demand base, including export markets,” explains Vannan. “But that change, and others, will not necessarily make the contract successful. The market requires a depth of product and breadth of participation to function, not just a contract. We — ICE and other invested parties — are working to engage different stakeholders with specific needs to participate at the same time to create an active and transparent marketplace over time.”

• More Grainews: Markets for barley in 2014

According to Aaron Anderson, assistant vice-president of merchandising at Richardson International and a member of the team that developed the contract, the new contract is a good hedging mechanism for both feeders and growers alike. “This is not a new contract per se,” explains Anderson. “It’s been in existence now for over two years in this new form. However, it is going to take time for users to migrate back to using futures from what has been, essentially, a cash market.”

Anderson expects that the barley contract, a clone of the canola contract, will find a user base as both buyers and sellers look to gain price security in the feed barley market. “Risk management is the key to successful trading,” he says. “And for players like Richardson and others, as well as the sellers of barley, a functioning, active barley hedging mechanism like this barley future contract is needed.”

Risk management

There are other ways to manage risk, but none are as efficient as the futures markets. “Risk adds cost,” says Vannan. “Farmers would experience this cost of risk in lower priced bids. Competitive markets like corn, soybeans, cotton and canola have evolved to be the most profitable crops to grow partly because using a futures market reduces the cost of risk. It’s efficient and it allows merchants to hedge and therefore safely enter into forward contracts that may not be executed upon for months. Price exposure over time is extremely risky especially in a competitive global market where prices are volatile. The added advantage is that with purchase and sales agreements firmly in place well in advance of contract execution, transportation and other logistics considerations can be planned well in advance which should result in more efficient use of potentially scarce resources. Sometimes in non-hedgeable markets, by the time buyers and sellers can agree on a price, all the logistics resources have already been spoken for and the contract can’t be executed.”

Although the CWB monopoly has been gone now for two full crop years, going into the third, the underlying environment still in flux. “Additionally, the grain trade is still consolidating ownership in Western Canada,” says Vannan. “Add to that the fact the livestock trade is shrinking and barley acres are declining and you can see the challenges the new barley futures contract faces.”

Farmers should expect slow, steady growth in the barley futures contract. “This is the first chapter of a long book,” says Vannan. “The futures market is arguably the most efficient market structure there is. It’s brilliant in the way it responds to and disseminates the flow of information, transfers risk and enables price discovery.”

Current lower prices may create more offshore demand for barley, which could lead to a broadening and deepening of demand. That will, in turn, create more competition and a need for price discovery and risk management.

“Futures markets do not create cash markets,” explains Vannan. “It’s the other way around, and our cash market, internationally, is very young. Only two years old. Add to that all the focus on the wheat market and logistics, and you can see that feed barley has been a little passed over to this point. And it may continue that way for some time. When those participants who realize their risk and have a desire to mitigate that risk efficiently in a futures market step up and start to use the contract, then there will be a market. We’ve designed an efficient contract with input from all the stakeholders. In some ways, many ways, it’s like leading a horse to water. Now, it’s up to that horse to decide if it’s thirsty or not.”

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