Farmers with barley in the bin have a bit of a love-hate relationship with barley prices right now.
They love that feed prices are so high, but hate that malt prices are so low.
“These prices are definitely something — to have feed prices where they’re at right now, it’s definitely out of the norm,” said Rimbey-area farmer Jason Lenz.
“I think everybody is enjoying these feed prices, but we’re just hoping that there are some good pricing opportunities for this year’s malt crop coming up.”
Demand for both feed and malt are up, here and abroad — partly because of sharply lower Australian production last year. That’s shown by Canadian exports, which had topped two million tonnes as of the start of March, nearly a one-third jump from a year earlier.
But while feed supplies are stretched, there was plenty of high-quality malt grown on the Prairies last year.
As a result, old-crop feed barley prices have shot up to $5 per bushel in some parts of the province, while old-crop malt has fetched as little as $4.25 a bushel.
Production contracts for the upcoming growing season are a little higher, at about $5 per bushel, but that’s still a far cry from the $6.25 per bushel that malt was fetching two years ago — even assuming producers can get a production contract at this point.
“A lot of the malt contracts for this upcoming year have been filled, and those prices weren’t at levels that growers wanted them to be at,” said Lenz, who is also chair of Alberta Barley.
“From a grower’s perspective, we think that the malt prices should be higher than what has been offered to date.
“Farmers are disappointed for sure.”
Hold or sell?
And that’s causing some farmers to hold on to their malt barley until prices rebound.
“When you oversupply the malt sector, naturally the overflow will go to feed,” said Brandon Motz, sales manager at CorNine Commodities in Lacombe.
“But if a farmer isn’t convinced his grain is feed, he’s going to hang on to it a little tighter.”
And while farmers can sell their malt-quality barley into the feed market to capture those higher prices, that is offset by the slightly higher cost of production for malt.
Plus, selling malt as feed can be a point of pride for some, Motz added.
“There’s a little bit of frustration from the farmers’ side, but through the fall, there was a lot of encouragement to make sure malt contracts were booked,” he said.
“They may be feeling a little bit of remorse over not making sure it was contracted.”
Even so, producers should see some benefit if they up their barley acres this year, and not only because India’s tariffs on pulses will leave producers scrambling to find a replacement in their rotation this spring. This year’s barley carry-out is expected to be around one million tonnes — about half of 2016-17 ending stocks, said Motz. If acres don’t increase this year, both feed and malt supplies might be tight next year.
“In essence, we’re saying that the amount of barley that’s going to be left at the end of this year is next to nothing,” said Motz.
That may mean some pricing opportunities for malt in the year ahead, Lenz added, who still sees value in trying for malt despite the disparity in prices right now. He doesn’t expect feed varieties will take acres away from malt varieties — when the growing conditions are right, it makes sense for barley growers to cross their fingers and work to get malt quality, even if prices are lower at this point of the season.
“Every year, we’re striving to get malt, and your chances of getting malt are a lot better if you can get it in the ground early,” said Lenz. “Early in the spring like this, everyone is optimistic that we are going to get a somewhat normal start to our seeding season, but Mother Nature always has a little bit to say about that.”
But producers need to be realistic about market opportunities, Motz cautioned.
“If you’re going to plant this year’s crop based on last year’s prices, make sure you’ve locked in last year’s prices,” he said.
“If you’re working extra hard to put in malt acres, make sure that’s sealed up with a contract.”
Ultimately, prices are what they are. Based on the bump in feed prices, Motz has been encouraging his clients to sell some of their barley into the rally, especially if they need the cash flow.
“It’s better than panicking on the way down.”