Canada: Plentiful barley supplies may pressure prices

Canadian barley supplies are likely to be burdensome in 2024-25, according to a market outlook published by the Saskatchewan Barley Development Commission.

Supplies are forecast to be in the range of 10.7 to 11.7 million tonnes.

“This is well above the 2023-24 supplies at 9.65 million tonnes and the five-year average of 10.3 million,” stated the report authored by LeftField Commodity Research.

That forecast is based on an acreage estimate that is lower than Statistics Canada’s 7.1 million acres.

LeftField believes farmers will plant 6.6 million acres because both feed and malt prices have declined since the StatsCan survey was conducted between mid-December and mid-January.

“The lower prices combined with poor movement have cast a shadow on the barley market and we’re hearing that farmers may opt for other cereals or pulses where they can,” said LeftField.

Production is forecast at nine to 10 million tonnes, which is aligned with the five-year average of 9.4 million tonnes.

Higher-than-average carryout from the 2023-24 crop will boost total supplies to 10.7 to 11.7 million tonnes.

Peter Watts, managing director of the Canadian Malting Barley Technical Centre, agrees with LeftField’s analysis.

He believes seeded acreage will be below seven million tonnes but maybe not quite as low as LeftField is forecasting.

Yield is the big question mark, but if average yields are attained, he agrees that supplies will be bloated.

“There is no question we’re going to see a big bump in (2023-24) carryout,” said Watts.

He thinks it could be as high as 1.5 to two million tonnes, the largest ending stocks in seven years.

“That’s going to weigh on the market, there’s no question,” said Watts.

LeftField said domestic demand has been weak due to large U.S. corn imports. Exports have also been lacklustre because of stiff competition from Australia in the Chinese market.

It expects U.S. corn imports into Canada to continue, although at a slower pace. There will also be sustained competition from Australia into Canada’s top export market.

As a result, ending stocks will remain “heavy” in 2024-25.

LeftField acknowledged that its production forecast uses average yields, but it is very dry in the western Prairies this spring.

Watts differs with LeftField on the demand outlook because Canadian barley prices have come down significantly, making it more competitive at home and in international markets.

“We will definitely see significantly lower corn imports next year from the U.S., and the Canadian barley will be much more competitive into the domestic market,” he said.

“We’ll see a pretty sizeable bump in domestic use of feed barley in Canada.”

The same goes for exports.

It looks like Australia might have another big crop. Commonwealth Bank of Australia is forecasting 11.11 million tonnes, a three per cent increase over last year.

“Due to plentiful rainfall on the east coast, the possibility of a drought market is significantly diminished,” the bank stated in a recent report.

However, it remains to be seen how Canada’s other main competitors perform.

“France has got some problems,” said Watts.

“It’s a bit too wet there. Their prices have gone way up, their malt barley prices in particular.”

Argentina’s crop is a long way from harvest, so that is an unknown.

The bottom line is that Canada has become more price competitive in export markets, so he is not as pessimistic as LeftField.

However, he does worry about demand for processed malt.

“Looking forward, it’s not super rosy,” he said.

Demand is faltering in the U.S. market, which also doesn’t bode well for malting barley demand.

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