Feed Barley Prices Fed By Fear

Panic impacted the marketplace this season, as evidenced by the latest feed barley figures.

”Drought fears raised prices this summer,” said Jay Burrows, general manager of commodity trading with Western Feedlots in southern Alberta. “That was largely based on low carryout supplies, compounded with the unknown yields caused by the prolonged dry spell this spring and summer. Once the new crop started coming in at yields better than expected, the price softened into the usual harvest low we’re experiencing now.”

Burrows put September delivery at around $210/mt, rising to about $215/mt for November.

Changing with the Seasons

Prices are now trending similar to other years according to Dave Guichon, president of the AgValue Group based in Calgary.

“Prices tend to bottom out in the fall, and then rally into the New Year as demand increases,” said Guichon, “but the numbers are a far cry from last year at this time.”

Feed barley was down to $165/mt in October of 2014 as high chitting flooded the market with feed barley that would otherwise have gone for malt.

“This year we had more malt barley out of Alberta so there was less pressure on the feed side.”
Feed Frenzy
In his capacity as a broker, Guichon is well-positioned to see the impact of prices on both buyers and sellers.

“With current prices, many farmers will wait until early next year to market their crops, but buyers need grain every day. Hogs need to be fed.”

As a result, buyers may want to lock in as much feed as possible now, while farmers wait to maximize their profits.

Location, Location

In Saskatchewan, the challenge goes beyond timing.

“With severe flooding since 2009, conditions aren’t ideal for growing barley,” said BCC director and producer Zenneth Faye from Foam Lake. “As well, there is no price discovery for barley on the futures market here, so it takes time to get a barley bid and determine what it’s trading at.”

For the most part though, it should be business as usual for both buyers and sellers; at least for now.

“The impact of the current price is fairly benign; it’s the potential for significantly higher prices driven by currency risk and unforeseen circumstances internationally that creates risk management concerns into Q1 and Q2 of 2016,” said Burrows.

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