If markets were only about supply, the barley market would have the potential to be very strong
this coming year. Ending stocks at the end of the 2007-08 marketing year are expected to be at
record-low levels as the strongest exports in over 10 years helped offset sagging domestic
demand. And despite the tight supplies, barley acres are forecast to be 10 per cent below year-ago levels.
While lower supplies might suggest a robust market ahead, particularly when we are experiencing
the most explosive corn market in history, significantly lower barley demand may actually allow
ending stocks to increase, thus capping upside price potential. The livestock industry is still
reeling from poor economics and ongoing herd liquidation, a situation which isn’t likely to start
showing improvement until well into next year. Corn imports should fall dramatically next year
as the U.S. struggles to balance its shrinking crop with its own feed and growing ethanol needs.
However, barley faces increased competition from expanding Prairie acres for mid- to low-quality
wheat and other cheaper feedstuffs that are being substituted into rations when it’s economical to
do so. The end result is that domestic barley feeding is not expected to rebound from last year’s
very low levels.
The big decrease in demand will come on the export front. This past marketing year Canada was
left with the world’s only major exportable barley surplus after both Australia and the Black Sea
region experienced crop shortages, allowing exports to reach an expected 3.2 million tonnes.
This year is likely to see exports fall by as much as 35 per cent. While Australian production is still
uncertain, the potential today for a large Black Sea crop along with a larger EU crop will severely
limit Canada’s ability to sell feed barley into the key Middle East markets.
Without an open
barley market by Aug. 1, feed barley exports will be limited primarily to the Japanese market,
with perhaps a small amount going into the U.S. Global malt barley competition is expected to
increase as well. As a result, even with lower production, Ending stocks are predicted to actually
increase by over 500,000 tonnes at the end of 2008-09.
Without disappointing domestic yields, another poor Australian crop or corn prices surging well
past their already eye-popping levels, the potential for feed barley prices to move much beyond
today’s values is limited.
— The FarmLink Market Insight was researched and produced by FarmLink Marketing Solutions, a marketing advisory service for Prairie farmers, and is published here with permission of the authors.