Barley prices appear poised to lose some of their vim, but
for oats, there is potential yet for a further "rally" before harvest pressure
on values begins to tell, Canada's farm ministry said.
Global barley prices "continue to hold their premium" to
corn, a major rival among feed grains, "since moving higher at the beginning of
March", the ministry, AAFC, said.
In Canada itself, feed barley had touched Can$185 a tonne at
one point, up $25 a tonne since the end of April and trading on a par with feed
wheat, said the ministry, attributing the strength in values in part to strength
in livestock prices, which can exert a pull on values of feed ingredients.
Furthermore, there was a "slowdown in producer deliveries as
spring seeding ramped up", with the majority of Canadian crops spring planted.
And a hangover from a wet harvest period last year had an
impact too, with AAFC noting "lots of vomitoxin wheats" – that is, wheat contaminated
with toxic fungal residues, encouraged by damp late-season conditions, and
which can require blending with clean grain to make it suitable even for
The wet nature of the 2016 harvest period was reflected in
an estimated 2.3m acres of last year's crop left standing as of the end of
year, for harvest in spring this year, or ploughing in.
'Prices should soften'
However, AAFC coarse grains analyst John Pauch raised
questions of whether the strength in barley values could last, saying that global
prices "should soften as the northern hemisphere winter barley crops harvest is
just around the corner, and the new crop supply becomes available".
Barley, with a relatively short growing period, is typically
one of the earliest grains reaped in summer harvests.
That said, AAFC, forecasting 2017-18 barley prices averaging
Can$160-190 a tonne in Canada, compared with the Can$160-170 a tonne expected
for this season, forecast that domestic barley prices would "increase slightly"
Values would be supported by "tighter total barley supplies",
with a market consensus of a smaller world harvest in 2017-18, and "decline in
the stocks of competing off-grade and other feed grains".
'Start of a price
By contrast, AAFC forecast that a rise in oat prices - which
on Chicago's futures exchange stand close to two-year highs, boosted by the
same dryness worries which have sent spring wheat values soaring – may have
"Long-term seasonality would suggest the start of a price
rally as end-users lock-up US new crop supplies," AAFC said.
The US is a structural importer of oats, mainly from Canada.
"Prices would then fall back when the oat harvest in Western
Canada begins during the last half of July."
AAFC nudged higher to Can$200-210 a tonne, from Can$190-210
a tonne its estimate for domestic oat prices this season, and to Can$200-230 a
tonne, from Can$190-220 a tonne, its forecast for 2017-18.