With harvest rolling south and producers looking to price grain, it’s worth taking a look at the relative value of barley. Often the first cereal harvested, it is often sold off the header, especially when it makes malt specifications. Feed barley values relative to wheat and international corn prices are good indications of value.
Barley prices have largely trended sideways since harvest began in
earnest. Like wheat, harvest pressure
appears to not have had the usual impact on price, which is to see them weaken relative
to international values in November and December.
Figure 1 shows east coast barley, here it is Geelong BAR1 has followed
ASX Wheat prices closely. In the West,
prices have rallied through harvest.
Malt barley tends to run its own race to an extent. In the west barley
which has made malt specifications is trading at a $20 premium to feed
barley. The premium is historically small
and has shrunk in from $36 in the last fortnight. We’ve seen a similar trend on the East Coast,
with malt spreads shrinking back to $20 in the last week.
Internationally feed prices have been tracking sideways, if we use CME
Corn as an indicator. The narrow range
of 30¢/bu for the last two months is unusual.
The current US corn price works out at $256/t in our terms, so our BAR
is still commanding a solid premium.
This is likely due to local feed demand, and solid interest from Chinese
barley buyers.
Traditionally feed barley will trade at around a $40 discount to
wheat. The difference in energy accounts
for the price spread in local markets.
With the barley discount to ASW currently sitting at $20-30/t, it makes
wheat good buying, and barley good selling, depending on which side of the
trade you are on.
What does it mean?
Based on the current situation, it looks like harvest pressure isn’t going to be a ‘thing’ this year. Unusually static markets are prices as they would be after harvest if normal relativities are taken into account.
Those warehousing grain out of habit need to assess if this is something they should be doing this year. It could be a seasonal hedge against a failed autumn or a belief that international markets are going to rally in the new year. Grain should not be held this year if the strategy is based on prices are always being better after harvest. If harvest pressure is not showing up, post-harvest rallies aren’t likely to come to the party either.
Key Points
- Feed barley prices have been steady to stronger over Spring, avoiding harvest pressure.
- Malt barley prices have eased a little as harvest has rolled on.
- Barley looks like good selling at the moment, compared to other grains.
Click on figure to expand
Data sources: Bloomberg, Mecardo
