BARLEY MARKET PERSPECTIVES

HIGHLIGHTS

• According to major agriculture analytical organizations such as the USDA and the IGC, the global barley S&D is historically tight. With world ending stocks projected at 16.7 million (mln) tonnes at the end of 2021-22 according to the USDA, that would be the lowest stocks since 1983.

• The war in Ukraine will impact the ability of both countries to export barley and other grains (corn, wheat) through the Black Sea for the foreseeable future. The two countries were projected to export 10.5 million tonnes of barley this year, almost a third of global exports.

• With limited options to source barley before the northern hemisphere new crop, remaining supplies this year will have to come from Australia or possibly Argentina, although even the export logistics in these countries are full well into spring.

• China's announcement on Feb. 24 they will now accept imports of barley and wheat from all origins in Russia will undoubtedly result in greater feed barley exports from the Black Sea to China in future. Neither Ukraine nor Russia export significant quantities of malting barley.

• With tight barley supplies globally and recent geo-political developments, international barley prices have remained firm with French old crop feed barley rising above US $400 FOB in recent days compared with ~$300 at the beginning of 2022 and ~$250 early last August.

Source: USDA – February Update.

CANADA

On December 3rd, StatCan released its final estimates for area, yield and production of field crops in Canada for 2021.

• Barley production estimated at 6.948 mln tonnes, including 345,000 tonnes in eastern Canada, smallest barley crop in Canada since 1967 (5.5 mln tonnes).
• Harvested area pegged at 7.4 mln acres, the highest since 2008 (8.7 mln acres).
• Average yields of 43.0 bushels per acre, the lowest since 2002 (41.5).

*Pulses include Peas, lentils, beans and chickpeas

Source: Statistics Canada, December 3, 2021

• Canada’s barley exports have been strong to date in 2021 in spite of the small crop, with Aug-Dec totaling 1.513 mln tonnes with China as the major destination. The majority of exports have been feed barley with a small amount of malting barley.

Source: StatCan

• Canada has been importing significant amounts of corn for the feed sector. As of February 24, there had been over 1.8 mln tonnes of corn exported to Canada from the United States with another 1.6 mln tonnes of sales on the books. AAFC is projecting 4 mln tonnes of corn imports which would be the highest on record.

• Canada will also import malting barley this year to supplement short supplies. Imports will come from origins such as the U.S., Europe and Australia.

GLOBAL EXPORTERS

• In its March report, ABARES (the Australian Bureau of Statistics) increased its Australian 2021 barley production estimate to 13.7 mln tonnes, the highest on record, up from 13.1 mln tonnes in 2020.

• Last year (2020-21) Australia exported 8 million tonnes of barley despite a de-facto embargo on exports to China. Australian exports were redirected to Saudi Arabia, Japan, Thailand and Vietnam, among others.

• Australia has also exported malting barley to some non-traditional destinations this year such as Mexico, Peru and Ecuador. Exports are projected at 8.5 mln tonnes in 2021-22.

• In spite of two successive strong export programs, Australia’s barley supplies remain healthy with carry out expected between 2-3 million tonnes at the end of the 2021-22 (estimates vary depending on the source).

• Final estimates of Argentine 2021 barley production are 5.2 mln tonnes, the largest on record. Total barley exports are projected at 3.65 mln tonnes, which would also be a record. With a large barley export program to China of over 2 mln tonnes, exports to traditional destinations such as Colombia, Ecuador and Peru for malting barley, and the Middle East for feed barley, have dropped significantly.

• EU barley exports between Jul 1 – Mar 6 totalled to 5.460 mln tones, up slightly from the previous year. With a smaller crop this year (51 mln tonnes vs 54 last year) both the USDA and the European Commission are forecasting EU barley exports down from 8.5 mln tonnes in 2020-21 to 7.5 mln tonnes in 2021-22, down, however based on the export pace to date that may be an underestimate.

CHINA

• China’s 2020-21 barley imports (Oct-Sep) are estimated by the USDA at 12 mln tonnes, an all-time record. All of the increase was in feed barley imports, with China generally taking 3-3.5 mln tones of malting barley annually.

• The USDA import forecast for the 2021-22 is 10.5 mln tonnes. With imports averaging 1.3 mln tonnes a month between Oct-Dec, this would seem an easy target, however with the disruption in the Black Sea, this may drop and China may have to look to the US and Argentina for additional corn supplies.

• Corn prices on China’s Dalian Commodity Exchange have rallied since the harvest low at the end of September of US $395 up to $450 per tonne in early March.

BARLEY PRICES

• Given the tight global S&D, barley prices have remained firm. Recent events have pushed those prices even higher with old crop French feed barley now quoted around US $400 FOB and US Gulf corn quoted at $365 FOB. New crop (2022) French feed barley is now estimated at US $350 per tonne FOB Rouen.

• Barley prices on the Prairies have also remained firm with Lethbridge feed barley values hovering around $440 per tonne or $9.50 per bushel delivered feedlot.

2022-23 OUTLOOK

• AAFC released its first projections for 2022-23 supply and demand in January. The year over year changes in seeded and harvested area are not signficant, and with a return to average yields, the forecast is for barley production of 10.5 mln tonnes in 2022. It is of note that the 2021-22 export forecast of 2.95 mln tonnes is likely on the high side by 300-400,000 tonnes, but with strong domestic demand carry out stocks of 300,000, the tighest on record, are likely in the ball park.

Source: AAFC, February 2022

• Precipitation on the Prairies has been average to above average in Saskatchewan, below average in a lot of the major growing areas in Alberta, and a mix of average to below average in Manitoba.

• COCERAL (an independent European agricultural trade association) is projecting EU barley area to be up slightly in 2022 to 10.75 mln hectares compared with 10.64 mln ha last year, driven by higher spring barley area, but production down to 51.5 mln tonnes (from 52.2) due to lower yields. Weather conditions have been favourable for crop development so far this winter with French winter barley rated 92% good to excellent, up from 83% a year ago.

• The trade has reported significant sales of 2022 crop French feed barley to China for new crop positions July forward.

• The USDA released its first seeding estimates for 2022 with corn seeded area projected at 92 mln acres, down from 93.4 mln acres in 2021, losing area to wheat and soybeans. The 5-year average is 90.6 mln acres.

BEER

• Canada’s beer sales have remained firm through the pandemic and are currently tracking a little higher for 2021, up 2.3% to November.

Source: Beer Canada

• Molson Coors reported annual revenue growth in 2021 with net sales up 6.5%, a significant turn around form 2020 when sales were down 8.7% during the pandemic.

• AB InBev reported an increase in the beer sales revenues in 2021, driven in part by a consumer shift to premium brands where revenues were up 20%. Budweiser Brewing, Asia’s largest beer company by sales, said it plans to promore more high-end beer in the Chinese market having seen strong demand growth in this segment in recent years, now over 15% of the beer market.