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Bulls & Bears
Each week we will look at a commodity to see what the bullish and bearish factors are in the market.
03/05/2010 - This week we look at feed barley.
Bulish Factors
Agriculture and Agri-Food Canada (AAFC) is forecasting the Canadian barley carryout will fall from 2.2 million tonnes in 2009-10 to 2.1 million tonnes in 2010-11. AAFC is predicting that Canadian barley acres will be down 3.5% this year. The Canadian Wheat Board (CWB) sees Canadian barley production dropping from 9.5 million tonnes last year to 9.2 million tonnes this year. AAFC expects this year’s barley production will come in at 9.45 million tonnes.
AAFC sees Canadian feed barley prices rising $10 per tonne in 2010-11 as compared to the 2009-10 crop year prices.
Trade sources say that China is now taking Canadian pork. The sources report that Canadian lean hog prices are testing 18 month highs.
Trade sources relay that Canadian feed steers and feed heifer prices gained 3 cents per pound this week.
Can Fax reports that the January Saskatchewan and Alberta cattle placed on feed numbers are 119% of 2009 numbers and 141% of 2008 numbers. Live cattle futures are reaching May 2009 levels.
The United States Department of Agriculture (USDA) sees US barley exports only reaching the 100,000 tonne mark this year. That is a historical low. They see US barley acres remaining steady in 2010 at 3.6 million acres. The US’s share of the Japanese barley market has fallen from 42% last year to 2% this year.
The Aussie Bureau of Agriculture and Resource Economics (ABARE) as well as the IGC are pegging the 2009-10 Aussie barley crop at 8 million tonnes. That is down from ABARE’s December estimate of 8.3 million tonnes.
Dmitry Rylko, General Manager for the Institute for Agrarian Studies sees Russian barley production falling from 17.9 million tonnes last year to 16 million tonnes this year.
Strategie Grains is forecasting a 7% drop in European Union (EU) 27 barley production this spring. They see a 58.2 million tonne EU barley crop this year. That is down 3.5 million tonnes from last year. The IGC expects a 7% drop in European barley hectares as European farmers plant wheat and rapeseed instead of barley.
The CWB is forecasting world barley production will fall 3.5% from 144 million tonnes in 2009 to 138 million tonnes in 2010. The IGC is predicting that global barley hectares will drop 1.2% to 55.4 million hectares.
Bearish Factors
AgroPrespectiva reports Ukrainian feed barley is being offered on the export market at between $130 to $135 US per tonne loaded in a ship in a small Ukrainian port. Back in December the range was between $132 and $142 US per tonne. For larger ports the loaded in a vessel price is between $134 to $140 US per tonne. Trade sources say the bids are $4 US per tonne below those asking prices.
UkrAgro Consult is predicting that the 2010 Ukrainian barley crop will come in at 11.8 million tonnes. Last year the Ukrainians harvested 11.6 million tonnes of barley.
E-malt.com puts European feed barley loaded in a vessel in a French port at between 87 – 91 euros (between about $122 - $127.50 Canadian) per tonne. That is down 1 euro (about $1.40 Canadian) from the middle of February and down 4 – 8 euros from December. In December the quote was 95 euros per tonne which was worth about $142.50 Canadian per tonne at that time. However, the euro has lost ground against the Canadian dollar. Current exchange rate values would put 95 euros at about $133 Canadian.
Trade sources estimate that the Europeans could have up to 16 million tonnes of surplus barley. The USDA reports that German farmers could have sold up to 1.5 million tonnes of barley into the intervention stocks. That is more than the total of all European barley intervention purchases last year. This is the last year of intervention. One trade source thinks that there could be up to 5 million tonnes of barley in intervention when the programme ends.
The Aussie grain handler, Cooperative Bulk Handling feels that Saudi Arabia “has an excess of 2 million tonnes of feed barley which is likely to put them out of the market for the short term”. USDA trade data shows that the Saudis only imported 1.5 million tonnes of barley during the last quarter of 2009 as compared to 2.4 million tonnes for the same period in 2008. The CWB says that Europe and the Black Sea countries have “more than enough” feed barley to supply the Middle Eastern markets.
The Aussie Wheat Board (AWB) reduced their expected pool return feed barley price by $4 Aussie (about $3.75 Canadian) per tonne in their February outlook. The CWB reports that Australia has “an over abundance” of feed barley due to the poor quality of their harvest.
Stats Canada put the January 1st Canadian cattle inventory at 13.105 million head. That is the lowest number in 15 years and 1.3% less than last year. Stats Canada estimates that were 4.17 million beef cows on January 1st. That was the fewest since 2000 and 4.3% lower than last year. The Stats Canada January 1st all beef cattle number came in at 7.924 million head. That is down almost 3% from last year. Stats Canada reports that 2009 beef and cattle slaughter numbers fell almost 4% from 2008 and 2009 cattle exports were 38% smaller than in 2008. Can Fax reports that the January Saskatchewan and Alberta cattle on feed numbers are 93% of 2009 and 98% of 2008.
The IGC is forecasting a small decline in Canadian seeded barley acres this year. However, the IGC expects that this will be more than offset by a lower abandonment rate than last year. The IGC is predicting that the harvested Canadian barley acres will climb from 5.2 to 5.3 million hectares.
Lethbridge feed barley prices have fallen about $7 per tonne since mid-December. AAFC is forecasting 2009-10 feed barley prices will be about $25 per tonne lower than they were in 2008-09.
Trade sources report that the large supplies of feed wheat and durum are putting a lid on barley prices. The sources say end users are increasing feed wheat and durum usage at the expense of barley. AAFC is forecasting about a 600,000 tonne drop in Canadian demand for barley in the 2010-11 crop year due to lower livestock numbers and competition from Dried Distillers Grains (DDGs).
The US Grains Council points out that Canada imported about 804,000 tonnes of DDGs from the US in 2009. That is up from 772,000 tonnes in 2008. The USGC is working with Canadian feedlots to increase the DDG inclusion rate in feed rations to between 15% and 20%.
The USDA is predicting that US corn acres will be up 3% this year to 89 million acres.
Larry Rapp, grain merchandiser for Sun Prairie Grain in North Dakota points out that barley prices get support from corn prices.. He believes that even if there is a “weather scare this summer it’s going to have to affect a large area before it gives any support to prices”.
Factors to Watch
Strategie Grains says that cold weather in the European Union could delay spring barley planting. The IGC thinks that the cold weather could result in farmers planting crops other than barley.
The USDA releases their March Supply and Demand report on March10th. This report will include a revised corn production estimate that will take into account the late harvest in the USA.
If the rise in livestock prices continues there will be additional animals brought into the system and this will increase demand for feed barley.
Large portions of the Canadian prairies are very dry and will require rain prior to seeding.
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PREPARED BY THE NORTH EAST TERMINAL MARKETING TEAM
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