Barley crops in western Canada are in good shape overall, although how much meets malt specifications will be highly dependent on weather conditions at harvest time. Prices have more room to the downside than the upside given the softer international market and expectations for large North American feed grain supplies.
 
“In general, things look pretty good,” said Darren Smith, managing partner with RMI Analytics Ltd. “We’re still two months away from harvest time,” he added noting that some low-lying areas were washed out, but the crops that were in early or in higher ground are flourishing.
 
“We’re on the better end of good-to-excellent for the majority of crops,” added malt barley broker Rod Green of Central Ag Marketing Ltd. in Alberta. “There are obviously some bad spots… but overall it’s looking pretty good.”
 
Before spring planting, expectations had been for a Canadian barley crop in the 7.5-million to 8.0-million tonne range, said Smith. That prediction was upped to about 8.5 million tonnes a month ago and “now we’re getting closer to nine (million),” said Smith.
 
In a typical year, malting varieties would account for about 60 per cent of the crop, with the total demand for malt barley coming in at around 2.0 million tonnes, said Smith. Of that total, he anticipated demand from domestic maltsters in the 800,000 to 900,000 tonne range in 2012/13, with 1.0 million to 1.3 million tonnes likely to be exported.
 
Using the FOB Vancouver price as an example, Smith said new-crop Canadian malt barley is currently valued at US$320 per tonne which compares with feed barley at US$250 per tonne. With malt barley trading at US$270 per tonne internationally, Canadian prices will need to come down in order to compete.
 
“We’re an island of high price here in North America,” said Green, although the favourable crop prospects are putting some pressure on prices in anticipation of harvest. The maltsters are generally covered for the time being, and are awaiting the new crop. Given the cheapness of feed grains, he said it will be hard to rally the malt market. The malt barley spread over feed barley is currently over a dollar per bushel in southern Alberta, but that has the potential to narrow in depending on the quality at harvest time.
 
There are some customers that prefer Canadian malt barley, who will pay a premium for the Canadian crop. U.S. demand is also expected to be large this year, as a smaller North Dakota crop will see more Canadian barley move down to Midwestern maltsters, said Smith.
 
China had a struggle with its domestic barley crop which will lead to an increased demand there, said Smith. However, whether or not Canada moves more barley to China will depend on if Canada wants to go down to the world price levels.
 
Argentina’s barley acres are also down this year, with production forecast at around 4.5 million tonnes, from 5.5 million in 2012. The country only uses a million tonnes domestically, and the rest is sold aggressively into the world market, said Smith.