May 7, 2004

 

Barley Prices Set To Rise Amid Cattle Industry Optimism
 

Weather concerns, reduced acreage and renewed optimism about Canada's cattle industry have been linked to recent price strength in western barley futures, according to industry sources. Those same factors were also seen keeping values firm heading into the summer.

 

"Feed barley prices have firmed," Charlie Pearson, an analyst with Alberta Agriculture and Food said. "Drought concerns, the reduced acreage ideas and to some extent the stocking of the feedlots with cattle can be associated with the strength."

 

He noted that producers who still have stocks of feed barley have been reluctant to give up those supplies. "Some of these guys have their own cattle, and are worried that supplies may only tighten further amid lower production due to reduced acreage or drought."

 

Statistics Canada on April 23 pegged 2004 barley acreage in Canada at 11.694 million acres, which was below the 2003 level of 12.469 million. The estimate also compares with pre-report ideas that ranged from 11.00 million acres to 12.1 million.

 

"We are likely to see the area on barley increase from what StatsCan reported given improved price prospects for the crop," Pearson said. "So that has some potential to hold prices in check."

 

However, he added that producers have also been keeping a close eye on soil moisture levels. "While there is still time for significant precipitation to arrive, doubts hanging over the market increase every day when the moisture is not received."

 

According to Jerry Johnson, a Lethbridge based broker with Benson Quinn-GMS, additional support in the barley market was seen stemming from the fact that it is spring, and producers are concentrating on field work in Western Canada rather than marketing.

 

Johnson also confirmed that dryness concerns remain a key factor in the market and have been providing underlying support.

 

Pearson stated the renewed demand from the feedlot sector has also been helpful in creating firmness in the barley market. He linked some of that demand to producer hopes that the US border would be reopened to Canadian live cattle sooner, rather than later.

 

Part of that hope was fuelled by the face-to-face meetings between US President George Bush and Canadian Prime Minister Paul Martin last Friday.

 

Rick Wright, Manager of Heartland Livestock Services in Brandon, Manitoba agreed there has been excitement created by the meeting.

 

"The talk in the market is when that meeting wraps up, there will be some sort of statement issued on when the border will be reopened," Wright said.

 

Bush in a televised statement after meeting with Martin, said both sides, with their respective agriculture representatives, examined the issue very closely, and will work to reopen the border "as soon as possible." However, no date for the reopening was provided.

 

Wright said that in anticipation of the announcement there was very aggressive western- based demand for cattle at the auctions held in Manitoba.

 

"The demand we saw from Western Canada wasn't just the smaller feedlots, but rather from some of the top Alberta players," Wright said. He indicated that these individuals have been very cautious buyers over the past year, but have really stepped up to the plate recently in a big way.

 

Cattle weighing 800 to 1000lbs were in big demand from these big operators.

 

Both Pearson and Johnson said the court order out of California, restraining the USDA from importing some cuts of Canadian beef, could limit some of the upside, but only in the short-term.

 

Feed barley prices, basis the cash market in Lethbridge were currently trading in the $154 area compared with $150 a week ago. Pearson said values have generally ranged between $155 and $160 per ton, depending on the region of the province.