Look­ing down for higher bar­ley prices

Prairie Post (East Edition) - - Farm News - BY BRENNAN TURNER - Farm­lead.com

In the Novem­ber WASDE, the USDA low­ered Aus­tralian bar­ley pro­duc­tion to 7.4 MMT. This is still 500,000 MT higher than the cur­rent es­ti­mate from ABARES. While to­tal pro­duc­tion and 2018/19 end­ing stocks were raised slightly, my eyes are on the Land Down Un­daa, and yours should be too.

COFCO, the ma­jor Chi­nese food player, says that Aus­tralian bar­ley owns about two-thirds of the Chi­nese mar­ket, ac­count­ing for about 4 MMT of China’s 6.5 MMT of to­tal im­ports. How­ever, these num­bers are based on av­er­age Aus­tralian bar­ley pro­duc­tion of nearly 9 MMT. Con­sid­er­ing this year’s bar­ley har­vest in the Land Down Un­daa will be 2 - 2.5 MMT below this, can they ex­port the same amount to China? Likely not!

Cur­rently, the USDA is fore­cast­ing Aus­tralian to­tal bar­ley ex­ports at 5.7 MMT, but ABARES thinks it’ll be closer to 5 MMT. This is, in part, due to the fact that Western Aus­tralian bar­ley buy­ers/ex­porters are mak­ing more money ship­ping it over to the east­ern side of the coun­try, where bar­ley prices are at record lev­els, in­stead of to China and other south­east Asian mar­kets.

So who can fill the Chi­nese de­mand that’s go­ing to ba­si­cally im­pos­si­ble for Aus­tralian bar­ley to meet, es­pe­cially that of malt bar­ley? We know that Canada is the ideal con­tender, but we’re also cog­nizant of Black Sea coun­tries be­ing able to pro­vide more feed to China.

Through Week 15 of the 2018/19 crop year (end­ing Novem­ber 11), Cana­dian bar­ley ex­ports are sit­ting at a to­tal of 528,700 MT, up 11.4% year-over-year. This is a strong con­trast to the past few weeks where ex­ports have been track­ing be­hind last year’s pace. Specif­i­cally, for Week 15 Cana­dian bar­ley ex­ports to­talled 62,100 MT.

For the full crop year, Agri­cul­ture Canada main­tained its stance that that we’ll see 2.4 MMT of bar­ley ex­ports out of the Great White North. That be­ing said, Agri­cul­ture Canada did drop its price ex­pec­ta­tion slightly as a re­flec­tion of higher global bar­ley sup­ply. How­ever, ev­ery­thing else on AgCanada’s bar­ley bal­ance sheet re­mained the same, in­clud­ing 1 MMT of end­ing stocks.

This is based on feed use also climb­ing 3% year-over-year to a lit­tle more than 5.8 MMT. Based on Farm­Lead Mar­ket­place trad­ing ac­tiv­ity though, we know that there is a lot more Amer­i­can corn and Cana­dian feed-qual­ity ce­re­als that are mak­ing their way into Cana­dian feed ra­tions. On a weekly ba­sis on Farm­Lead, feed wheat and Amer­i­can corn are con­sis­tently be­ing sub­sti­tuted for feed bar­ley for those who are try­ing to ask to high of a price.

I’m a bit doubt­ful of this high of bar­ley feed use for the to­tal 2018/19 crop year, but we can take so­lace in the fact that a strong ex­port cam­paign should keep prices fairly prof­itable on both the feed and malt bar­ley side of things.

This should also push end­ing stocks below 1 MMT but in­tu­itively, this likely means we’re go­ing to see more bar­ley planted in the spring of 2019 as pos­i­tive re­turns are pur­sued by all of Western Canada.

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