The barley balance sheet is set to increase in ending stocks this year and the coming crop year thanks to large planted area totals but only moderate increases in use. We are in a slightly better situation than earlier this crop year, however, thanks to the trade spat between Australia and China. Unfortunately, the good news essentially ends there.
Planted area is estimated at 7.5 million acres, which is up marginally from the March forecast at 7.25 million and is marginally larger than the planted area in 2019. In fact, it would be the largest total since the 2009 planting season and generally was a surprise given the demand losses on the malting side, thanks primarily to COVID-19 lockdowns. The acreage outlook is keeping a lid on much price optimism as total supplies are forecast to grow over a million tonnes versus last year.
Domestically, we face pressure on both the malting and the feed side. For feed, we have ample stocks, exports are unimpressive, and U.S. corn is cheap and could be working its way into Canada. When looking at the malting side, the worse for that industry could be over. Domestic malt barley bids have been steady for a while as consumers continue to come out of the lockdown period earlier this year. But we still lost some demand.
Exports could be the bright spot this year thanks to a trade spat between Australia and China. Historically, Australia is the primary source for China’s barley imports, accounting for more than half of the share. Canada is in third place, on average, but is close to matching France’s share. Ukraine and other countries account for less than 10% of China’s historical barley imports.
USDA sees Canada exporting 2.4 million tonnes of barley for 2020/21, which would be the largest program in years. FBN leans toward a total near USDA’s forecast — essentially between 2.3 and 2.6 million tonnes. A lot will depend on China, and USDA sees China holding its import total around 5 million tonnes for 2020/21. Canada’s share in the Chinese market is expected to increase, but with Australia having additional surplus we may not be able to squeeze much else into the export market.
FBN holds a bearish outlook for feed barley but a neutral outlook for malting barley. We have ample supplies for barley all around, but if China does gain interest in Canadian barley that will help the supply outlook. Prices have remained somewhat supported lately. Seasonally, we do have some weakness into September. Unfortunately, we expect prices overall to be lower versus a year ago.
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