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Jul 7, 2023

Barley Market Perspectives

July 7, 2023

HIGHLIGHTS

Seeded area of Canadian barley for 2023 was reported by StatsCan at 7.32 mln acres, up 4% from last year’s 7.04 mln acres and in line with the 5-year average acreage. Acreage gains were led by Alberta, with an 8% increase while Saskatchewan plantings were only 1% larger than last year.

The latest crop ratings for Saskatchewan and Alberta show sizable declines in recent weeks, raising concerns about 2023 yield potential. Conditions are quite variable within western Canada, with the most severe problems in the southern prairies. Dry conditions and hot weather also raise the possibility of higher protein in the barley crop.

Rain has fallen in northern Europe, but forecasts of the spring barley crop have been shrinking in recent weeks due to earlier dryness. According to Stratégie Grains, spring barley production in 2023 could be down 18% from last year for the EU and UK. The winter barley crop is still expected to be 4% larger than last year.

The initial Australian barley crop estimate for 2023/24 from ABARES came in at 9.93 mln tonnes, 30% less than last year and the smallest crop since 2018/19. This was despite a 4% increase in seeded area, as El Niño is expected to reduce yields.

China imported 1.28 mln tonnes of barley in May, the highest monthly amount since November 2021. This barley came from seven different origins, with France, Argentina and Canada the three largest sources.

According to the Argentine Ag Ministry, seeded area of barley for the 2023/24 marketing year is expected at 1.60 mln hectares, 11% less than the 1.80 mln in 2022/23.

The USDA has estimated 2023 US seeded area of barley at 3.36 mln acres, 14% more than last year. The USDA is also reporting the condition of the 2023 crop is deteriorating.

PRICES

Malt barley prices in key markets are moving generally sideways in recent months and are now mostly below levels seen in 2022 and early 2023. In North America, bids at country elevators are now getting back to levels seen prior to the 2021 drought, with Canadian bids recently dropping toward new-crop levels. At the end of June 28, the average western Canadian elevator bid for malt barley dropped to US$240 per tonne, down from the late 2021 peak near US$400 and close to the spring 2021 levels around $US230 per tonne. Meanwhile, Australian prices are still at the low end of the range as trade has not yet resumed with China. Malt barley prices in Europe are firmer, with gains starting to show up in France due to weather concerns.

Feed barley prices in these same selected markets have also faded from earlier highs but appear to be stabilizing in recent weeks. The average elevator bid for feed barley in western Canada is US$250-255 per tonne in June 2023, down US$10 per tonne from January 2023 and below the peak of US$310 per tonne a year ago in June 2022. Australian barley prices still represent the low end of the market while Argentine and French prices are declining.

CHINA

In 2022 and early 2023, Chinese barley imports were well below the record levels seen in late 2020 and 2021. Imports from Canada had dropped off when the 2021 North American drought took hold and China shifted its buying to Argentina. Then, when the Argentine crop was reduced, China shifted back to Canadian barley. In the past three months, Chinese buying has ramped up again with the focus on French, Canadian and Argentine barley. It’s also worth noting that more Ukrainian barley started to make its way into China again in May.

While China’s tariffs on Australian barley imports haven’t been removed yet, officials are working toward a resumption of trade. Prior to the tariffs being imposed in May 2020, Australia had been the largest supplier of feed and malt barley to China. Even with a smaller barley crop in 2023/24, Australia should regain a sizable place within the Chinese market.

EUROPE

While rains in northern Europe have provided some relief recently, dry conditions had already reduced yield potential for the spring barley crop. According to Stratégie Grains, spring barley production for the EU and UK is now forecast at 22.6 mln tonnes, 18% less than the 27.7 mln tonnes in 2022 and even farther below the 5-year average of 30.3 mln tonnes. The largest hit to the spring barley crop occurred in Spain, the EU’s largest spring barley producer, where drought cut the crop nearly in half. The reduction in the spring barley crop will have a sizable influence on the European malt barley market. The winter barley crop, mainly destined for feed, matured earlier and avoided most of the adverse conditions. Stratégie Grains is estimating the winter barley crop at 32.2 mln tonnes, 4% more than last year and above the 5-year average of 29.4 mln tonnes.

BLACK SEA

The USDA is projecting a 2023/24 Russian barley crop of 19.6 mln tonnes, down 9% from last year. Its estimate of the Ukrainian crop is 6.4 mln tonnes, 4% larger than a year ago but well below the pre-war average of 8.7 mln tonnes. Ukrainian barley exports in 2022/23 have reached 2.46 mln tonnes as of April. Volumes are moving steadily higher, as opposed to the normal pattern of a heavy fall shipping program with limited volumes the rest of the year. The largest destinations for Ukrainian barley in recent months have been Turkey, China and Romania.

AUSTRALIA
According to ABARES, the 2023/24 barley crop is forecast at 9.93 mln tonnes, 30% less than last year. This is despite seeded area rising to 4.29 mln hectares, 4% more than a year ago (but still lower than the 5-year average of 4.84 mln hectares). ABARES is forecasting a reduced 2023/24 yield of 2.31 tonnes per hectare due to possible impacts of an El Niño event. This yield would be lower than the 5-year average of 2.58 tonnes per hectare and could be too pessimistic. 

During the time Australia was shut out of the Chinese market, it produced three very large barley crops, which needed to find a home. Prior to the trade dispute, Australia relied heavily on China as a market for its barley, both feed and malt. With much larger supplies in 2020/21 through 2022/23, exports shifted heavily to Saudi Arabia, other Middle Eastern countries, Japan and southeast Asia, primarily feed barley, although Australia did make some inroads into new malting barley markets, with Mexico being the largest example at over 300,000 tonnes in each of the last two years 

This shift in trade resulted in a much smaller percentage of Australian barley exported as malt barley. In the two years prior to the trade dispute, roughly half of Australian barley exports were malt barley, but that dropped to approximately 10% in the past two and half years. 

ARGENTINA

According to the Argentine Ag Ministry, seeded area of barley for 2023/24 is expected at 1.6 mln hectares, down 11% from 1.8 mln in 2022/23, but official yield estimates are not yet available. The USDA is forecasting a 2023/24 Argentine crop at 4.5 mln tonnes, unchanged from last year and just slightly above the 5-year average of 4.4 mln tonnes. With a decline in area, this USDA estimate would imply a solid recovery in the 2023/24 yield from last year’s drought reduced results. While there are concerns about dryness in the country, rainfall in the Buenos Aires province, where malt barley production is concentrated, has been close to average so far in 2022/23.

UNITED STATES

The USDA recently raised its 2023 US barley seeded area estimate to 3.36 mln acres, 14% more than last year and the largest acreage base since 2015/16. Harvested area was estimated at 2.53 mln acres, only 4% more than 2022/23. With the 5-year average yield of 72.9 bu/acre, 2023 production would end up at 184.1 mln bushels (4.0 mln tonnes), 6% more than last year’s crop and the largest since 2016/17. That said, an average yield could be difficult to achieve as the USDA is also reporting that the condition of the 2023 barley crop has been declining. As of June 25, 46% of the barley was rated good or excellent, dropping further below the 10-year average condition at 65% good/exc.

CANADA

In late June, StatsCan updated its estimates of 2023 barley seeded area at 7.32 mln acres, 4% larger than the previous year but in line with the 5-year average area of 7.36 mln acres. Seeded area of barley increased 8% in Alberta and was up 1% in Saskatchewan and BC while acreage showed small declines in other provinces. Plugging in the 5-year average yield (including 2021) of 64.1 bu/acre would result in a 2023 crop of 9.2 mln tonnes, 8% less than 2022/23.

According to the provincial reports, barley crops in the two main producing provinces are deteriorating. As of the last week of June, 63% of Saskatchewan barley was rated good or excellent, a sharp drop from 82% two weeks earlier and now dipping below the 10-year average of 67% good/exc. In Alberta, conditions had improved slightly in mid-June but then declined again to 40% good/exc in late June, far below the 10-year average condition of 72% good/exc.

Canadian barley exports have been running at a strong pace most of the year, but declined to 189,000 tonnes in April, dipping below the average for the month. This brings the year-to-date total for the first three quarters of 2022/23 to 2.52 mln tonnes, well above last year’s drought-reduced amount of 1.83 mln tonnes and ahead of the 5-year average at 2.03 mln tonnes. So far in 2022/23, China has accounted for 84% of Canadian exports, with the US taking another 14% of the total.