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Thunder clouds on horizon for feed grain users

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    Thunder clouds on horizon for feed grain users

    Just a note to put people on alert about some issues that are emerging in the feed grain market. Lots of other things that have cattle producers attention but don't totally ignore what is going on in this arena. As users, you should be aware of the following.

    1) Watch this Friday's statcan crop production estimate (keeping in mind the survey was done first week Aug.). 12 to 12.5 MMT would be reasonably neutral to prices. Over 12.5 and I think western barley will come down. Under 12 MMT and western barley will head higher.

    2) The CWB pooling system hides most of this but you should be watching international feed barley prices. A combination of drought in Australia a year ago, the EU this summer and poorer crops in Russia/the Ukraine has resulted in tight supplies this fall. At the same time, both Japan and Saudi Arabia have monthly feed barley needs. Interational prices have responded by heading higher. Current prices off Portland are running about US $135/t. Won't write down the math to make this into an Alberta price but would equate to a price of Cdn $120 to $130/t if western Canadian farmers had direct access to this market.

    3) Imported US corn has potential to work back into S. AB. rations this winter under the right set of circumstances. Two factors to follow - which side of the 10 bln bu the US corn is and whether the loonie is closer to US 70 cents or 75 cents.

    4) Barley producer psychology and delivery patterns. Lots of people in this chat area wear both hats and realize the complexity of decisions that face managers this fall with regards to cash flow. An area I will be spending more time watching is basis - wide today but I think will pull back to more normal levels this winter.

    No real recommendations other than to encourage everyone to manage risk. A part of this will be not to try to cover all feed needs at once but rather step up your purchases/hedging a piece at a time.

    What are others thoughts on feed grain markets?

    #2
    Charlie I'm fairly ignorant about the grain market. I do suspect, however, that there could be a pile of underweight barley. I also suspect the arabs and Japanese might not be too keen on 38 lb. barley!
    A lot of feedlots(and pig barns for that matter) used corn last year and most of them found it a very positive experience. If the price is right they will use it again. Well, if they are still in business that is!
    What does it cost to ship grain to port? After all the costs does it really make sense? And if it is profitable then by all means the grain farmer should go for it! But fully realizing that next year when the EU returns to normal production you can't compete and by that time your local feedlot might not exist anymore!

    Comment


      #3
      Canadian feed barley estimate came in at 12.0 MMT. People will discount this estimate as was surveyed in July.

      Estimates can be found at: http://www.statcan.ca/Daily/English/030822/d030822a.htm

      Comment


        #4
        cowman - sorry for the delay on cost of moving grain.

        Port price today is about $175/t in store Vancouver.

        To get back to an Alberta price, you need to deduct the following (Costs are for Edmonton and reflect CGC maximums - grain company may do for less).

        Rail freight - $28.35/t
        Elevation - $125.55/t
        Removal of dockage $7.40/t
        CGC weighing and inspection - $1/t
        CWB pooling costs/interest and storage for grain company - $5/t.
        Total cost $55/t

        Result if central Alberta farmer had direct access to the market - $120/t delivered elevator. This value will vary with grain company/location.

        Comment


          #5
          Saw your other comments. Light barley will likely be an issue although will likely get fed on farm - what are your thoughts? Will leave for others thoughts on corn other than to indicate have heard the same thing. Will feedlots pay a premium for corn? How much? What does imported corn have to say about Alberta competitiveness?

          Comment


            #6
            Elevation is $12.55/t - not $125.55. If it was the latter, we should all be investing in grain companies. Sorry for the mistake.

            Comment


              #7
              Thanks Charlie. I think that $120 price is about right in the ballpark of what you could get in Lethbridge after trucking costs. Of course you wouldn't have to go through the old CWB run around and you get your cash right away.

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