Jan 9, 2019 - The Canadian barley export market continues to be very vibrant, with exports from August 1 – December 31 at 954,000 tonnes (T). This compares with 772,000 T last year at this time and the five-year average of 519,000 T.
China continues to be the most dominant buyer, importing over 500,000 T since August 1 of feed and malt barley, the majority being malt. Our second largest customer was Japan (136,000 T) and then Kuwait and the United Arab Emirates (UAE) (105,000 T of feed barley).
There will be more sales executed through January forward and China remains a buyer of malt barley for positions April through the summer months, providing Western Canada has sufficient barley to market.
Canadian malting barley sales now are primarily focused on the domestic market, which purchases roughly 900,000 T per year, and the export market that is dominated by China. The United States (U.S.) market, which in the 2000s bought over 250,000 T per year, has significantly cut its imports of Canadian barley in recent years. This past year, with the Buy America campaign, they are contracting virtually no malt barley from Canada.
On the feed barley export side, with Canada excluded from trading into Saudi Arabia, other destinations have emerged this year such as Kuwait and the UAE. Reduced barley export supplies from Australia and Russia this year are creating opportunities for Canadian global feed barley trade.
The domestic feed market continues very strong and feed is now trading in the $251 T-range for January. A limited amount has traded into June at $258 T. A combination of the feed usage and good export demand is projected to take Canada's barley carryover down to 1 million T, a number unheard in the Canadian Wheat Board days as they protected the market and would not permit the carryover to dip to these tight levels.
On the export malt barley side our biggest competitor is Australia, which to the end of December had traded 5.4 million T of barley into China and shipped 6.1 million T for the 2016/17 crop year, during which China imported 8.9 million T. However, a recent anti-dumping suit investigation launched by China into Australian feed barley may preclude Australia from shipping additional barley stocks to China this year. This would potentially give Canada an opportunity to export more barley to China in 2019. However, given that China imports nearly 70% of its barley from Australia, this issue should get resolved quickly. Australia, similar to Canada, is not known for purposely selling grain under world values.
Europe had crop issues this year and so is not a major competitor on the global malting barley market. Recent rains have helped alleviate dry conditions that affected parts of eastern and Northern Europe last summer, and have boosted river levels which is helping with the intra-European Union barge movement.
After harvest delays due to rain in December, Argentina had harvested 88% of its barley crop as of January 2 and the early forecast had been for a 3.8 million T crop. However, if yields continue to surprise to the upside, crop production could reach 4 million T which would be a 9% increase over last year's production. Early indications suggest higher than average protein levels (e.g. 11%). Argentinian farmers only seed malt barley varieties, the major one being Scarlett. Argentina traditionally supplies other South American countries with malt barley, especially Brazil and Colombia. For the past four years Argentina has averaged over 2.5 million T of exports, mostly malt barley into South America with some feed and/or malt going to China and some feed barley going into Saudi Arabia.
Harvest progress over the past three weeks has been painfully slow in Western Canada. The weather has been abysmal. Snowfall, frost, and rainy wet conditions have made harvest a nightmare. Farmers in all three provinces have been stymied by the inclement weather conditions which in many areas prevented them from entering their fields.
The unharvested barley acres, which have been subject to relentless wet conditions, will certainly dash the hopes of many famers of having their barley accepted as malt barley. With the outlook for warmer, dry conditions over the next week, there is always hope that some of the late seeded barley that is still standing could meet malt specifications, however the reality is that most of the unharvested barley will be downgraded into the feed category.
The wet conditions certainly reduced the amount of available malt barley that will be offered to the export market. Prior to the rain and snow, it was estimated there would be 3.5 million tonnes of malt barley available for the domestic and export market. Now we will have to wait for the final number when harvest is complete, but there is no doubt that the crop remaining to be harvested will not result in much additional malt barley.
Even with the poor harvest conditions, Saskatchewan is the one bright area that produced some good malt barley tonnage. There is still optimism that Canada will easily surpass one million tonnes of malting barley exports this crop year. Recently exporters have raised their prices in the country trying to increase their barley purchases to ensure adequate supplies for our export markets, particularly China.
Of the three western provinces, Alberta has been the most severely affected by the weather issues. Normally Alberta is 85% complete at this time of year but presently it is slightly less than 50% done. Team Alberta, which comprises the Alberta wheat and barley commissions, Alberta Pulse Growers and Alberta Canola, is alerting Alberta Agricultural officials that there is over $3 billion in crops that remain in the field. They want to make sure that government agencies are prepared to respond promptly to unharvested acre claims and to consider all options to help farmers deal with a difficult harvest. Presently, there is still more than seven million acres to be harvested in Alberta, with the majority of the acres in the middle and northern tier of the province. All areas of the province struggled the last few weeks to advance in their harvest.
- South: This area is normally doing fall work at this time of year and it resumed harvest Monday afternoon. Their forecast looks good for the next two weeks and they should easily complete the harvest of the last seeded barley and other crops still in the fields.
- Central: This area has been stalled with snow cover and little progress has been made in the last ten days. There is great harvest weather is in the forecast starting today and well into next week which should give farmers a great opportunity to harvest their crops.
- North: This region has less than 50% of their barley harvested as conditions have been awful for the last month with snow, frost and rainy weather plaguing this region. The weather forecast is for good warm weather for the next ten days.
In Saskatchewan, the crop is slightly over 80% harvested and there is warm dry weather in the forecast for the entire week with day time temperatures in the mid- to lower-teens. This should give farmers in most regions of the province the opportunity to harvest the remainder of their crops. The area that is most at risk is the northwest section, which has been hit with excessive wet conditions consisting of snow, rain and frost. Most, if not all, of the barley in this area will have to be dried. The southeast and southwest corners of the province are within days of completing their harvest.
The forecast in the northeast corner of the province, where farmers have harvested 65% of their crop, is for a warm dry week which will likely support a huge jump in harvested acres. Some farmers in this area have not turned a wheel in the last three weeks. The west-central and east-central regions are also roughly 65% completed in their harvest, however the warm weather forecasted for this area in the next week will give farmers the opportunity to get their combines rolling.
For all intents and purposes Manitoba has completed the harvest with barley production estimated around 500,000 tonnes this year with generally favourable results for malting barley. Much of the remaining barley that is being harvested is wet, which is testing farmers’ abilities to dry their crops and causing additional costs. Those who do not have dryers are relying on the commercial grain terminals to dry their crop, however some of the inland terminals do not have functioning dryers and others have refused to accept any more grain to dry at this time as they are overrun.
Harvest is advancing quickly, especially in the southern regions of the Prairies. Combines are also rolling across the central and northern regions of the Western provinces. Conditions are near ideal for harvest with the recent hot and dry weather. Crops are drying quickly which will give the farmers uninterrupted access to harvest their crops. Barley harvest should be completed by the first weekend of September.
The long-lasting dryness that lingered over the Prairies through the growing season will and has severely reduced yields. The early barley yields have been below expectations due to the dry and overly hot weather. To date, the majority of the regions have indicated that their yields are 10% to 50% below average. The 50% reduction has occurred in southern Alberta, which suffered through extreme heat stress and minimal rain. There were expectations, in mid summer, that the Prairies could have above average yields, however those thoughts have been forgotten as the early harvested barley fields are yielding below average crops. Also, the prospects for the later harvested fields to yield above average yields are not optimistic. Only a few areas, such as around Tisdale, have produced average yields.
In last month's supply demand update from Agricultural Canada, there were projections of of 8.5 million MT barley crop, up 600,000 MT from last year, due to higher seeded acres. With a combination of variable weather and rainfall, it remains to be seen where Statistics Canada pegs actual barley output in its first crop production report, due at the end of this month. Conditions were quite variable across all regions over the summer so final yields and production estimates are uncertain at this time. The thought is that the crop size will be closer to 8 million MT, which will tighten the domestic barley supplies, meaning cattle feeders will have to supplement with corn, brought in from either the U.S. or Manitoba. The smaller barley crops globally should enable Canadian barley exports to surpass the two million tonne mark this marketing year.
Feed barley for September through December delivery in Lethbridge is currently priced at around C$250 to $255MT, and some offers have been as high as $260/tonne for December. In comparison, corn delivered to Lethbridge for October through December is currently sitting around C$252 to $254/tonne, with January to March delivery at $262 to $264. This year the wheat and durum crops will be of high quality, similar to last year. Therefore there will be little wheat or durum entering the feed market. U.S. corn and dried distillers grains (DDGs) will have to enter the feed market to fill the void created by the tight barley crop.
Canada isn’t the only country where barley production has suffered. Output is also expected to be down in other major exporting countries including Australia, Russia, Ukraine and the European Union. This reduced world barley production and strong global demand for both malt barley and feed barley have moved the prices for Canadian barley up by $20US/MT in the last few weeks.
Global barley production in 2017 is estimated by the USDA at 141.7 million tonnes (mt), down from 147.1 mt in 2016. Output is lower in Australia (8.0 mt compared with 13.4 mt in 2016), Canada (7.3 vs 8.8), the US (3.1 vs 4.4) and Argentina (2.8 vs 3.3). Production is up 3 mt in Russia year over year to a record 20.5 mt.
Australia – The Australian barley crop is estimated at 8.0 mt, down from 13.4 mt last year, a 40% drop as yields fell from record levels in 2016 to below average this year. Rainfall during harvest this year, particularly in eastern Australia, slowed harvest and impacted quality reducing the amount of Malt 1 available. As of the end of November, the harvest was estimated to be 1/3 complete in Victoria compared with over 50% complete in Western Australia.
In the EU malting barley supplies are up considerably year over year given the major improvement in the French crop. However quality problems in eastern Europe and in Germany have limited the French export surplus.
The U.S. harvested its smallest barley crop on record at 3.1 mt, compared with 4.3 mt last year, a 29% drop, and 4.75 mt in 2015. Large supplies of malting barley left over from a bumper, high quality harvest in 2016 led to fewer contracts by maltsters and brewers in the U.S. this year.
Western Canada, harvested its best malting barley crop since 2013 with selection rates running 65-70%, although strong feed prices are keeping the spread narrow with good quality malting barley moving into the feed sector in some areas. Protein content in the 2017 crop is slightly below trend averaging around 11.5%, lower than expected given the dry start and finish this season. See the Canadian Grain Commission’s Quality of Western Canadian Malting Barley report released December 4th.
The percentage breakdown of area of the 3 major varieties as follows (last year in brackets): CDC Copeland 49% (44.7%); AC Metcalfe 32% (34.2%); AAC Synergy 7.5% (5%).
NORTH AMERICA – After a cool, wet start to the season in Western Canada, which delayed seeding in some areas, hot and dry conditions this summer have taken a toll on crops, particularly in the southern regions of Saskatchewan and Alberta leading to expectations of below average yields and high protein in cereals including malting barley. The barley harvest has now started in southern Alberta, Saskatchewan and parts of Manitoba, while in more central areas some finishing rains would help to fill crops and replenish soil moisture. Preliminary harvest reports of high protein and thin kernels in barley are not surprising, particularly for the earliest samples.
Barley seeded area in Western Canada is estimated to have dropped 10% from 2016 resulting in expectations for a smaller crop this year. The latest Agriculture and Agri-Food Canada Supply and Demand report from July 18 projects a 15% drop in barley production in Canada down to 7.4 million tonnes (mt) compared with 8.7 mt in 2016.
In the U.S. harvest is underway with the barley crop in North Dakota and Montana having faced similar weather issues as the southern Canadian Prairies. As a result analysts are projecting a significant drop in malting barley output this year compared with last year’s bumper crop. The USDA state survey pegs N Dakota barley yields 18% below last year at 55 bushels/acre (67 in 2016). The USDA is currently forecasting US barley production at 3.1 mt in 2017 compared with 4.3 mt last year and 4.75 mt in 2015.
EUROPE – In the EU the winter barley harvest is now complete while spring barley harvesting is finished in France, however in Germany rains have stalled the last part of the harvest leading to concerns over quality. The spring barley harvest is well under way in the UK with the potential for a healthy malting barley surplus this year, and harvesting has started in Scandinavia although recent rains have slowed progress for the time being.
SOUTHERN HEMISPHERE – In Australia recent rains have benefited crops, rescuing barley in key growing areas from the previous drought conditions and creating hopes for an average barley crop of 8-9 mt. Still, more rain will be needed through the Spring to protect barley yields. The USDA is projecting barley production at 8 mt tonnes compared with 13.4 mt in 2016.
Argentina continues to receive unwanted rain which may have already reduced barley plantings. The USDA is projecting barley output at just 3.0 mt compared with 3.4 mt last year and 5 mt in 2015.
The 2017 crop season is well underway with seeding advanced or completed in many of the major barley exporting countries. We now head into weather market season as analysts monitor the conditions on a weekly basis to assess the impact on projected yields and quality. We present a summary of seeding progress, crop conditions and market indications in each area.
Australia continues to move their record 2017 barley crop with some reports suggesting China may import over 7 MT (of malting and feed). Recent export activity has slowed somewhat which may be due to logistical issues more than anything else. Seeding conditions in Australia are looking favourable due to recent rains in the East where seeding progress exceeds 75%. South and Western Australia are somewhat drier with seeding approaching 60% complete (remember there is not a limited seeding window as there is in the Northern Hemisphere). Successful seeding and germination depends primarily on moisture conditions.
The European malting barley market has been quiet with few sellers. With seeding completed weeks ago, the weather over the next few weeks will impact the market one way or the other as crop development is assessed. Previously, conditions had been too dry and too cool. Some 2017 crop estimates have put total EU barley production below last year's 60 MT. That may prove to be pessimistic. Generous rainfall last week across most of Western Europe and expected warming temperatures should advance the crop significantly. However, continued rains will be necessary in the coming weeks as conditions are drier than normal. Conditions in Spain, where rainfall has been sparse, are much worse. Spanish barley production may fall 30% from last year's 9.27 MT.
The only significant barley market activity recently has been the 1.5 MT Saudi Arabia tender (for July shipment) . Most of this is expected to be supplied from the Black Sea countries. However, cool temperatures in Russia have delayed seeding considerably which may firm up values to the point where Russian barley is not competitive. Russian barley exports are running well behind last year's pace (2.7 MT to date versus 3.9 MT in 2015-16). In Ukraine, spring barley seeding is just completed but development has also been slowed due to cool temperatures. Harvest of winter barley should begin by late June.
Argentina has experienced heavy rainfall in recent weeks which has delayed corn and soybean harvests and subsequently barley seeding. Some trade sources suggest barley area could decline further if farmers opt for wheat or even corn and soybeans (as a winter crop) due to the wet conditions. However, there is also an argument for more barley area due to its shorter growing season. Much will depend just how wet conditions are and farmers' assessment of which crop is best suited.
Barley seeding in the U.S. is nearing completion which is about two weeks behind normal, due to rainfall and cool weather. In Western Canada, barley seeding continues to lag behind average, also due to cool temperatures and wet conditions. However, recent warm temperatures are now advancing progress rapidly. The areas that continue to struggle with conditions are Northern Alberta and Northern Saskatchewan. Forecast warm weather should enable rapid progress but there could be an increased vulnerability to poor harvest weather including frost.
Plentiful world grain and oilseed stocks continue to weigh on the overall grain markets which in turn is keeping pressure on malting barley prices. In this context the barley market situation is not bullish although current weather conditions and lower seeding projections could lead to higher values going into next year.
Australia’s record crop, including an estimated 13 million tonnes (MT) of barley, has resulted in plenty of logistical issues as they try to move the crop to market with container equipment supply apparently next to non-existent. Feed prices have increased about US$ 10/tonne is the past week following a 1.5 MT Saudi tender, and with plentiful malt barley supplies the malt/feed price spread has narrowed, although with China returning to the market following their New Year holiday there may be some price support.
The European malting barley market continues to be relatively quiet. Supply of good quality malting barley is tight (particularly in France) but demand is slack as is brewers’ demand for malt. The 2016 crop values are at a premium to new crop 2017 prices. Exports of total EU barley through January, 2017 are only 2.7 MT versus 6.38 MT last year. The winter barley crop is generally in good condition with total 2017 EU barley production expected to increase to 61 MT. However, Western Europe has had limited rainfall which, if it persists, could begin to affect the crop as spring approaches and temperatures warm. Currently, the greatest market activity is with Scandinavian and UK barley that are being traded domestically and to other EU buyers.
The Black Sea (Russia/Ukraine) winter barley went into dormancy under good conditions. However, the Russian crop experienced very cold weather in January with inadequate snow cover in many locales. Therefore, some winterkill may have occurred. Russian barley exports through January this year are at 2.14 MT versus 3.34 MT last year. To date, Ukraine has also experienced cold conditions but snow cover may be adequate for protection from winterkill. Overall, crop conditions in Ukraine have improved and their 2017 total barley production has increased to 10 MT. Any crop lost to winterkill is typically re-seeded to other crops in the spring so that remains lost barley production.
Argentina has completed their summer crop seeding which should bode well for timely harvesting pending the amount of rainfall at harvest. An early harvest can encourage wheat seeding over barley if returns are similar, however currently barley is at a discount. Some analysts expect 2017 barley area to fall 20%. Argentina’s good quality 2016 crop should fill the domestic malting demand and the import requirements of other South American countries (about 1 MT in total).
Statistics Canada Dec 31 barley stocks were 6.4 MT versus 5.7 MT in 2015. However, the domestic malting/brewing industry is dealing with yet another year of limited supplies of good quality malting barley. Conversely U.S. malting barley stocks are ample and it is expected that the amount of 2017 malting barley production contracts in the U.S. will be down significantly this spring. The Canadian situation has resulted in uncompetitive prices for the world market which is limiting exports.
With much of barley harvested in Europe, analysts are revising production forecasts lower along with estimates of available malting barley supplies. On August 26th the EC released updated forecasts lowering the barley crop to 59 mln tonnes versus their July forecast of 62.1 mln tonnes (60.7 in 2015). Barley across much of France and Germany is reported to have disappointing yields and test weights, with the winter crop in France particularly hard hit.
In Canada the barley harvest is approximately 50% complete with early indications of variable quality. On August 26th Statistics Canada raised its projections of Canadian barley production to 8.7 mln tonnes from its previous forecast of 8.2 mln tonnes, however private forecasts put the crop at 9-9.5 mln tonnes.
In the US the barley harvest is almost finished, well ahead of normal. Higher yields than last year will offset some of the drop in seeded acreage however total production is still projected to fall to around 4.1 mln tonnes compared with 4.7 mln tonnes in 2015.
In Argentina barley seeding is nearly complete with area projected to be down significantly from last year as rain prevented producers from seeding. The Argentine barley crop is projected by the USDA to drop significantly to only 3.0 mln tonnes compared with 4.9 mln tonnes in 2015.
Recent rains in Australia have improved crop conditions setting the stage for another good crop in 2016 with projections for barley output at over 9 mln tonnes compared with 8.6 mln tonnes in 2015.
In the Black Sea (Russia/Ukraine) barley harvests have gone relatively well with output up year over year. UkrAgroConsult is projecting Russia’s barley crop at nearly 18 mln tonnes compared with 17.4 mln tonnes in 2015, and Ukraine at 8.9 mln tonnes of barley versus 8.25 mln last year.
The highlights of the past two weeks include firming European barley values due to concerns over disease pressure from continued rains. Meanwhile Western Canada received very timely rains and warm weather to advance crops toward an optimistic outcome. Australian barley areas have mostly received good rains with the exception of South Queensland and Northern New South Wales. Prices have been steady as there has been some Chinese demand.
Continued rains in central Europe (France) have resulted in disease issues (fusarium) and lodging of winter barley stands. There are fears that fusarium may also be prevalent in spring barley as conditions were wet during flowering. Heavy rains in Germany have also raised similar concerns. Even if the fusarium problems are not as severe as some expect, protein levels will undoubtedly be on the low side. Rains in Eastern Europe have been substantial but in a positive way as the crops are now looking good after a dry start. Spain is looking forward to their best barley harvest in years as production could hit 8 million tonnes. UK weather conditions have been positive and the barley crop is progressing well. Their market is also firming due to concerns over the French crop. Conditions in Denmark continue to be much too dry with yields now projected to be below average and protein levels higher than average. The latter point might actually be beneficial to counter the low proteins of the central European crop. Overall, farmers are hesitant sellers of new crop while the trade is looking to get some coverage.
Argentina barley seeding is in its early stages after wet weather delayed the soybean and corn harvests. We still expect the barley area will still be down dramatically as the export tax system makes wheat more attractive to grow and sell.
The Black Sea (Russia/Ukraine) barley crop is looking much better as recent warm dry conditions replaced excessive rains. The spring crop is looking especially good while the winter crop has suffered some problems.
Conditions continue to be excellent in the U.S. barley growing states. Crop advancement exceeds the five year average and the crop ratings have a high percentage in the “good to excellent” category. Rainfall amounts have been ideal and the irrigated areas have sufficient water supplies.
Western Canada has received very beneficial rainfall and relatively warm temperatures which have advanced the crop. Private production forecasts have increased the crop size to near 9 million tonnes. A large percentage of the crop is now classified as good to excellent. Domestic feed barley values have been steady as pasture conditions slowly recover.
Malting barley supplies in Australia are relatively tight this year given smaller than average selection rates from the 2015 crop. A dry, hot finish during last year's harvest negatively impacted crop quality. Currently conditions are quite dry in Australia which may favour barley plantings over other crops such as canola.
In Canada there will be virtually no malting barley carry over this year after two consecutive years of poor harvest weather resulting below average supplies in both 2014 and 2015. However Statistics Canada recently projected barley area to rise in 2016, likely the result of good expected returns for malting barley, though many areas in Western Canada are dry with rains needed in coming weeks.
In the EU malting barley supplies are sufficient given last year's large crop, although some lower grades may have been absorbed into the feed barley market where strong export sales have narrowed the premium for malt quality. Barley export licenses issued by the EU reached 8.1 mln tonnes last week, 1.2 mln tonnes ahead of last year. Spring seeding is advancing well and the winter crop is in good condition.
In the US, a large carry over from last year's excellent crop has meant lower contracting this year. This will result in a smaller area seeded to malting barley with existing carry over stocks expected to make up the difference in the event of lower production. Barley seeding progress is reportedly close to the 5-year average.