Barley Rationing

[rain]

I just confirmed the first major feedlot switching to Wheat this week.

Doe not like corn, has used wheat in the past and can not buy barley, 20,000 plus cattle.

I expect we will see a few more switch as well.

[melvill]

This week I visited a major feedlot with 100,000 head capacity and, unless all H__l breaks loose, they will not be switching to corn or wheat. They have had a large barley hedging and forward buying program in place for some time. That program will provide all their feed grain needs until late winter or early spring. In fact they are so happy with their program that they claim that their cost of gain is significantly below the industry average!

[rain]

The problem is that their is a lot of lots who do not have a whole lot booked forward.

What I am saying is it is easier to buy wheat and the logistics for corn may be maxed out right now. Do not be surprised to hear of more wheat being used by feed lots.

Some lot managers are hoping more and more feedlots use corn and wheat and leaving more barley for them.

Agriculture and Agrifood Canada is forecasting a 1.700MMT barley carry out this year. If the PRO for CPSR wheat and the initial price for the two do not increase dramatically it would make poor business sence to contract that wheat to the CWB.

The last time we had this type of carryout 1.700 MMT feed barley went to $4.00 /bushel in the Calgary region. The two main differences this year to me are
1/corn was not even considered let alone used then,
2/Feed wheat got to $6.25 a bushel that year.

95/96 is the year we have to compare too. I think when the smoke clears carryout for barley this year will be closer to 2 MMT.

Wheat is cheap and easy to buy right now.

[melvill]

Yes, rain, I agree with your assessment that lots of feedlots haven't forward bought incoming feedgrains but I can't substantiate that with anything other than my experience talking to feedlots in the past.

I mentioned the feedlot in my previous post as a way of making a point that price risk management can be done and relatively easily.

For the life of me I can't understand why feedlots don't do that. Is it the fear that they will miss placing their long hedges or forward purchases at the absolute bottom of the market? Can you image the effect on the bottom line of a feedlot of hedges or forward purchases put on a futures equivalent of, say, $135 to $140/tonne which is nowhere near the bottom of Dec Western Barley futures since last February? Do you suppose the fear was that Dec barley futures would go to $130?

[ianben]

A question from UK
Why do your feedlots feed wheat or barley and not a mixture of the two.
We before BSE had a small feedlot and found due to similar situation, if we mixed wheat and barley up to 50% wheat we got real good results from the cattle.
So good in fact we always used at least 20% wheat from then on, and still do today even for the few we still keep.
We mix before rolling usually using different sized augers to to get the right mix.

Something for barley producers tothink about though!!!
Will they get all those markets back next year?

Regards Ian

[rain]

melvill

Some feed lots are just like producers. "Oh well I missed the bottom" (Producer says "I missed the top.") but it will come back depending if you are a buyer or seller.

Generally both are right they just have the timing wrong. Bullish or bearish everyone is right, it all comes down to timing.

$162-165 delivered Lethbridge has traded this week. Those tonnes could have been corn for $150 or wheat for $155.

I have been there waiting for prices to fall while they continue to rise. Producers have been their to. Canola is a great example. Hard to beleive but there is still $10.00 canola on the farm in Alberta. How many years is that.

[charliep]

Ianben

Depending on price relationships, most feedlots prefer to feed a blend of wheat/barley (normally 20 to 30 % wheat - if prices allow). 100 % wheat is normally too hot a ration for cattle although with proper ration balancing/ care and the acceptance of at least a few more health problems, some feedlots will push the envelop.

Given our forage shortage this year, many ranchers are feeding straw/wheat to cows (6 to 8 lb of wheat isn't enough to hurt animals). I will let others comment on backgrounding rations.

Hogs are a different story with barley for the most part getting booted mostly out of rations (except for finisher rations). The Alberta Pulse Growers web site provides rations (http://www.pulse.ab.ca/gowans/economics.cgi).

[ianben]

Thanks Charlie
Thought things should be the same.
Most thimgs seem to be including the plight of farmers no matter where we farm.
That Ukranian grain that depressed our market is being sold at below cost of production, so they say, because of lack of storage due to bumper yeilds.
So the Ukranian farmer is not making money either!!
Will we ever learn not to produce and sell???

Regards Ian