Canada: Barley exports forecast t decrease to 12-year low this season

For 2016-17, Canada’s total domestic barley use is forecast to increase by 5% to 6.11 mln tonnes due to higher feed use for cattle and hogs, Agriculture and Agri-Food Canada said in its March report.

Exports are forecast to decrease by 9% to a 12-year low of 1.825 mln tonnes due to lower world feed barley demand. However, malting barley trade remains similar to last year.

Barley carry-out stocks are forecast to increase by 42% to 2.1 mln tonnes, well above the previous 10-year average.

The Lethbridge cash feed barley price is forecast to decrease from 2015-16 due to the higher supplies, softer US corn prices and competition from other feed grain substitutes. Since the beginning of the calendar year, the Lethbridge barley price has traded in a C$10/tonne (t) channel and has decreased to crop year lows. This crop year, much higher feed grain and forage supplies on the prairies and a mild winter have led to slow market conditions. Feed barley basis levels are averaging close to the previous five-year average.

On both sides of the border, prices for malting barley continue to soften under good supplies but they still maintain a strong premium to feed barley prices. Depending on the province and location, there will be some spring harvested cereals available later in the April/May period. Currently, it is difficult to forecast the effect that they will have on feed barley prices as commercial and large farm feeders are quality-conscious because ration control is important.

The world feed barley markets are showing more resilience than the malt market as malt’s premium has narrowed to crop year lows with continuing abundant supplies. Despite the softer market conditions, the average world malt premium still remains above the previous five-year average. However, for the first couple of months the premium was about US$80/t and now has fallen to below US$30/t. If that trend continues for the rest of the crop year, it will balance out to be near the five-year average.

For 2017-18, Canada’s barley-seeded area is forecast to decrease 3% from 2016-17, to 2.5 mln ha, due to high barley carry-in stocks.

Production is forecast to decrease 9% to 8.0 mln tonnes due to the lower area and a forecast for average yields. Despite the lower production, the large carry-in stocks will allow total supply to decrease by only 2% to 10.1 mln tonnes.

Total domestic use is forecast to increase by 3% to 6.635 mln tonnes due to slightly higher feed use in cattle and hog production.

Exports are forecast to increase by 3% to 1.875 mln tonnes because of steady world supplies and trend trade patterns.

Due to slightly higher total use and exports, barley carry-out stocks are forecast to decrease by 22% to 1.6 mln tonnes and remain above the previous five-year average.

The Lethbridge cash feed barley price is forecast to increase slightly from 2016-17 due to a slight recovery in coarse grain prices which is led by US corn. Similar to the US, the Prairies have seen very little activity in new crop malt barley contracting due to the sharp decline in number and size of US malt contracts. There have been some limited prices being posted and these are lower than at the same time last year.

The USDA is projecting a decline in US barley area similar to Canada. However, without contracts in place, the USDA 2017 projected area decline of 3% is probably under-stated as producers may turn away from barley because of the sharp feed discount.

The International Grains Council (IGC) has given its first world barley forecast for the 2017-18 crop year. The IGC is forecasting a slightly higher harvested area and given reasonable yields this should keep world barley production flat to higher and could add to the already high supply of malt barley. The past few years’ total use has been very flat and a higher total supply will have the effect of increasing ending stocks. If world prices for corn can strengthen, this will help both feed and malt barley values to some extent. However, the premium for malting barley relative to feed barley is forecast at about US$40/t.

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