Canada Markets

Feed Barley's Spring/Summer Price Potential

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The blue bars represent the percent change in the southern Alberta feed barley price between the end of February and the high reached in the March through July period. The red line shows the stocks/use ratio for barley for each year, including the estimate for the current 2014/15 crop year. (DTN graphic by Nick Scalise)

Feed barley prices delivered into the feedlot sector of southern Alberta has already rallied from a low of $164/mt in mid-September to a reported $200/mt Friday. The question is whether this market has legs to move higher in the upcoming months.

The attached chart shows the percent change in feed barley prices delivered Lethbridge over the past five years between March 1 and the highest weekly price reported prior to the end of the crop year, as shown by the blue bars. The lowest percent change reported in that period was seen in 2012/13, when prices advanced 4.9% from the March 1 price to the high reached in the week of May 20, while the highest was seen in 2013/14 when prices advanced 23.9% to the high reached in the week of May 12.

Over the past five years, the average move took prices 12.7% above levels seen at the end of February. Such a move could suggest a move to $225.70/mt in the months to come and could be supported by the tight stock situation given seeded acres for 2014 reaching a record low while production also reached a record low.

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The red line on the chart indicates the trend in the stocks/use ratio of Canadian barley. While this year's stocks/use ratio is estimated at 10.4% in current AAFC estimates, the lowest in the six years shown on the chart, this may be a poor predictor of the spring price trend. The weakest percent change in price in the five years shown was seen in 2012/13 in a year of a falling stocks/use ratio, while the highest percent change in price was seen in 2013/14 in a year of an increasing stocks/use ratio.

Canada's lowest production comes at a time when the International Grains Council is calling for a record global trade of 24.7 mmt in 2014/15. Canada's week 29 exports through licensed channels are reported at 842,900 mt, 201,300 metric tonnes or 31.4% higher than year ago volumes. This is still behind the steady pace required to meet the annual export forecast of 2.150 mmt reported by AAFC, but this activity will support values in the domestic market.

Friday's official import data from China indicated that country imported 880,953 mt of barley in January, up 786% from year-ago data. While Australia supplied more than half of this volume, Canada supplied 98,206 mt which was 185% above January 2014. This could be a factor to watch.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

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