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Bulls & Bears
08/21/2000 - FEED BARLEY
This week we will look at feed barley.
Bulish Factors
Strafor reports that up to 25 million tonnes of grain was lost in the Russia and the Commonwealth of Independent States due to locusts.
The United States Department of Agriculture (USDA) expects Moldavian barley production to decline by 50,000 metric tonnes to 140,000 metric tonnes this year due to the drought that country experienced.
Recent European Union (EU) barley sales have been made without the use of export subsidies. European barley is currently selling for between $107 to $108 USMT loaded on to a ship in a European port.
DTN reports that a German farm group says that the German winter barley crop production is down 5.1% and the summer barley crop production is down 32.8% from last year.
The Canadian Wheat Board expects to export over 1 million metric tonnes of feed barley this year.
The International Grain Council is forecasting an increase in world barley trade from 18.3 million metric tonnes in 1999-00 to 19.5 million metric tonnes in 2000-01.
Bearish Factors
The USDA increased its estimate of world barley production by 500,000 metric tonnes in its August Supply and Demand report. The USDA is now estimating total world barley production at 133 million metric tonnes. The USDA says that the losses in barley production in Eastern Europe and the European Union were offset by the one million metric tonnes estimated increased production in the Ukraine and Kazakhstan.
There have been reports of US corn being offered to sale in Southern Alberta at discounted values to barley. The USDA is forecasting a record crop at 10.369 billion bushels and despite increasing its estimated demand in the August report, the USDA is calculating that carry out stocks will swell to their highest levels since 1987/88.
The USDA bumped up its US barley production by 745,000 bushels in its August report over its July estimates. US barley production is now expected to be 9% higher than last year. The USDA bumped up its forecasted US exports by 50,000 metric tonnes due to recent sales the US has made to the Saudis.
Saskatchewan Agriculture is forecasting an almost 1.7 million metric tonne increase in the size of the Saskatchewan barley crop this year as compared to last year.
Factors to Watch
In July, Saudi Arabia announced a subsidy programme to help ease the pain of increased barley prices for domestic users. The programme is designed to maintain domestic barley prices by subsidizing the price of imported barley. However, the details have not been finalized including when the subsidy would be paid out. Some farmers in Saudi Arabia have not been paid barley they delivered to the Saudi government-buying agency three years ago.
There have been rumours that the U.S. sold 110,000 metric tonnes of feed barley to the USA during the 3rd week of August. If the US is able to sell feed barley to the Saudis it may reduce the amount of barley that it will sell to the Japanese. Currently, Japanese barley prices are lower than the Saudi price. However, if the US continues to sell to the Saudis then the Japanese prices may start to command a premium to the Saudi price. That would be bullish news for the Canadian barley price as the CWB is able to capture that premium for the feed barley pool.
While recent EU barley sales have been made without subsidies, there is no guarantee that this will continue in the future. The quality of EU wheat has been deteriorating and the amount of feed wheat available has been increasing. This has lowered the cost of EU feed wheat. This lower price wheat combined with the large corn crop pushing down corn values could start to affect the value of EU barley. This could lead to a situation where EU barley is once again being exported with the use of subsidies.
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