Record high exports push up barley prices

This was not expected,” says Bruce Burnett, director of markets and weather information with Glacier FarmMedia. “Farmers weren’t expecting to be paid $6. 50 to $7 for feed barley.”

While prices like that are great for barley growers, they’re not so great for livestock producers looking for reasonably-priced feed. The question for both is: Seven bucks for feed barley? What. Is. Happening?

Well, exports are happening — recordhigh exports — and it doesn’t look as if they’ll be dropping off anytime soon. “In the past, most of our barley exports have been malt,” says Burnett. “The difference this year is that feed exports have gone up and that’s largely because of the hog herd in China. China is really the driver here.”

The growth in barley exports began last year and, by the end of December, total barley shipments were 1.6 million tonnes, 1.483 million of which went to China, says Burnett.

To put that into perspective, the Canadian Grain Commission (CGC) had inspected 2. 1 million tonnes of barley for export by the end of December 2020, which is almost the halfway point of the current crop year. During the previous crop year (2019/20), the CGC inspected 2. 192 million tonnes of barley in total. It’s little wonder, then, that barley export projections for 2020/21 sit at 3. 5 million tonnes. “I think it’s going to go higher than that,” says Burnett.

So, does this mean soaring barley prices for the foreseeable future? Maybe, says Burnett. But the bigger issue might be supply.

DIPPING INTO THE PIPELINE

“Anything under 1 million tonnes of barley carryout is tight in Western Canada,” says Burnett, adding that current projections put this year’s ending stocks at 700,000 tonnes. That’s quite a bit lower than the 2019/20 ending stocks, which were 900,000 tonnes. The big question for 2020/21 barley carryout is: how tight can it go?

“We have a huge reservoir of demand for this year’s barley crop,” says Burnett. “China will buy whatever we can grow. ” This is, in part, because China is in a trade spat with Australia. “China is not buying barley from Australia, which produces more barley than we do,” he says.

“Traditionally, as soon as the Australian crop is harvested in December, China buys it in January,” he says. “So they’ve come to the Canadian store and bought most of it. We’re going to exceed barley export numbers from last year, but by how much is the question.”

One concern Burnett has is that, in order to meet increasing export demand, Canada is going to pull down to pipeline stocks leaving very little wiggle room for domestic buyers, including livestock producers looking for feed and maltsters who need a constant supply to keep their plants running.

“We end the crop year on August 1, and malsters will start getting new barley crop 20 to 30 days later,” says Burnett. “Feeders can use alternatives, but it’s going to be a hard situation. Feeding cattle is going to get expensive.”

REPLENISHING OUR STOCKS

“In the past, most of
our barley exports have been malt. The difference this year is that feed exports have gone up and that’s largely because of the hog herd in China”
Bruce Burnett
DIRECTOR OF MARKETS AND WEATHER INFORMATION GLACIER FARMMEDIA

High demand and high prices speak to barley production area in 2021. Will it go up to meet this demand, or do high commodity prices across the board make it a wash?

“There are good prices on virtually everything so farmers are looking for area to grow it all,” says Burnett. He thinks most farmers will maintain barley area from last year and that, if there are any changes at all, they’ll be slight.

“Changes to crop area this year are a going to be far less than people might think,” he says. “To see big swings in acreage, I just don’t think it’s going to happen. When you can make money on oats, on barley, on peas, on just about everything, why change your crop plans?”

One thing that may influence barley area this year has nothing at all to do with China’s voracious appetite. “We’ve seen a big jump in fertilizer prices,” says Burnett. “That does favour barley because you use less in that crop than in wheat or canola.” (see sidebar below)

He notes that last year’s growing season was excellent with mostly perfect weather conditions resulting in high yield and quality. “The barley yields last year were pretty good overall,” he says. And yet, barley carryout last year was still tight.

“My concern is if we don’t have good growing conditions this year,” says Burnett. “If that happens then we’ll be even tighter. We just don’t have that margin of error if yields drop by five to ten per cent this year.”


Fertilizer prices on the rise

It’s pretty normal to see fertilizer prices rise a little each spring. But this year they are skyrocketing. And this has many nervously eyeing their input costs.

“Urea is usually the volatile one,” says Brian Gross, product strategy manager, crop nutrition with UFA in Calgary. “Phosphate is normally the secondary concern, but now it’s the primary one.”

Indeed it is. According to Gross, the yearover- year wholesale prices for most key fertilizers are up, but phosphate takes the cake. In March 2020, it was $530/tonne; in late February, it was $990/tonne. Urea isn’t far behind at $700/tonne, up from $465/tonne last March.

While a global shortage of phosphate is driving the problem, a big compounding factor for Canadian farmers is that this country no longer produces its own phosphate, says Gross.

“The Redwater plant closed over a year and a half ago,” he says, referring to a former Agrium-owned facility located northeast of Edmonton that was the last remaining phosphate manufacturing plant in Canada. “This is the first full-on year where we’ve had no production from there.”

So where are we getting our phosphate from? The U.S. and therein lies a problem.

“Back in September-October, there was a stall in prices and some U.S. producers complained that they were being undercut by off shore suppliers,” says Gross. Those complaints were heard and the U.S. imposed tariffs of 30-70 per cent on phosphate imports.

An appeal was launched just as phosphate prices were rising and, because the appeal is still ongoing, supplies remain tight as U.S. manufacturers hang on to what they have. “Everyone’s waiting to see what the price does,” says Gross.

It seems ridiculous, because with prices so high now, why not sell? It’s partly down to U.S. manufacturing capacity, which isn’t quite enough to cover all of North America. “They don’t want to undersell it, and they also don’t want to oversell it or people will just back out of contracts,” he says. So it’s a waiting game.

Other regions are producing phosphate. Gross says, North Africa is set to exponentially increase its production, for instance, but Canada imports all its needs through the U.S. so, again, we are beholden to the tariff problem. “We could import phosphate directly into Canada, but it’s impractical for a number of reasons,” he adds.

“We are fast coming to a point where supply is going to be a bigger issue than cost,” says Gross. His advice? “There’s always a transportation bottleneck in spring, so if you’ve booked your fertilizer, go pick it up now.”

And if you haven’t? “Pencil out what you need and just get it,” he says. “The question to ask yourself is: ‘Do you want to pay a lot or not get any fertilizer at all?'” FF