Tight Barley Supply Driving Up Global Grain Prices

Tight global supplies of barley are pushing up demand for corn and contributing to increases in prices across the grains complex, traders and analysts said Thursday. 

 

A sharp fall in barley production in Europe and the Black Sea region is lifting demand for feed corn at a time when more of the grain is being used to make biofuels, pushing buyers from the Middle East to the U.S. to lock in supply.

"There is limited supply of feed wheat and barley, and therefore demand for corn for use as animal feed has gone up," Abdolreza Abbassian, secretary of the United Nations Food and Agriculture Organization's Intergovernmental Group for Grains, said.

"France and Germany suffered from terrible rains at the wrong time, which resulted in excess moisture and damaged the barley crop," Abbassian said.

Global barley production is likely to fall 14% in 2010-11 to 130 million tons, he said. FAO estimates are based on the aggregate of the different marketing and crop years of producing countries.

The Middle East, a major buyer of feed barley, is now substituting part of its needs due to the shortage--countries such as Saudi Arabia, Syria and Jordan are scrambling to purchase more corn.

"Corn is coming under pressure from all sides and not least from the lower barley availability in the market," according to a Singapore-based executive at a global trading company.

The U.S. corn stocks-to-use ratio is at a multi-year low, with strong demand pushing prices to a two-year high despite ample supply with harvest ongoing.

Meanwhile, the U.S. Department of Agriculture estimates that 2010-11 global corn consumption will rise by 10 million tons to 830 million tons.

Moreover, a sharp rise of 3.2 million-3.3 million tons in global biofuel production to 19.2 million tons is likely this year, Thomas Mielke, editor-in-chief of the Hamburg-based journal Oil World, said earlier this month.

Wheat and corn prices hit their highest levels in two years over the last two months after Russia banned exports of grains amid its worst drought ever, while feed barley prices also rose to multi-year highs above $300/ton last month.

U.S. No. 3 corn is currently being offered around $230/ton, free on board.

Average global barley prices are up 80% from a year earlier, with export prices of barley from France and Germany rising around 68% since mid-July to around $269 a metric ton, and Australia's malting barley prices up 54% in the last three months.

According to FAO estimates, Russia's barley output is likely to halve to 9 million tons in 2010-11, while overall production in the Commonwealth of Independent States--Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan--is forecast at 23 million tons, down from 36 million tons in 2009-10.

While Russia has experienced a drought, the barley crop in the European Union is forecast at 57 million tons, down 8% on year.

Abbassian said the entire grains complex is intertwined and although wheat prices have fallen below $7.00/bushel recently, they may rebound in tandem with corn and barley prices.

Dow Jones Newswires

USDA plans biofuels meetings in Sacramento region

The U.S. Department of Agriculture will hold nine public meetings throughout the state to solicit comments on the subject of biofuels.

“(U.S. Department of Agriculture) is working to expand energy opportunities by producing alternative forms of energy and fuel, and to ensure that we are doing the research necessary to allow agriculture to transition away from its rather significant dependence on fossil fuel,” USDA secretary Tom Vilsack said in a news release.

Public input is being sought on how state and federal agencies can better partner with the private sector to increase demand for biofuels. Among the topics to be discussed are sources of feedstock, the current local infrastructure to support biofuels, and the estimated amount of land needed in California for biofuels.

USDA agencies will consider each comment it receives as it completes a Biofuels Strategic Production Report. The report is part of the department’s strategy to help recharge the economy with a successful biofuels market.

Public meetings in the Sacramento region include:

• The Central Sierra Resource Conservation & Development Council hosts a public meeting at 2:30 p.m. Oct. 4 at Jackson City Hall.

• The Central Sacramento Valley RC&D holds a public meeting at 3 p.m. Oct. 14 in Oroville at the Feather River Tribal Health Center.

• The High Sierra RC&D hosts an 11 a.m. Oct. 15 meeting in the Placer County Board of Supervisors Chambers in Auburn.

Comments can be submitted by Oct. 24 to Val Dolcini, state director of the USDA Farm Service Agency, at val.dolcini@ca.usda.gov.


Read more: USDA plans biofuels meetings in Sacramento region - Sacramento Business Journal

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