Issue 91
Prairie Grains

Library

Home

E-Mail

Back

Prairie Grains is the official publication of the Minnesota Association of Wheat Growers, North Dakota Grain Growers Association, Montana Grain Growers Association and South Dakota Wheat, Inc.

Copyright Prairie Grains Magazine
March 2008

Barley Prices Remain Strong - News from the North Dakota Barley Council

Growers are finalizing their planting decisions, and the strength in prices for small grains may be causing growers to re-evaluate their cropping mix for 2008.  Wheat and barley that was placed in storage following the 2007 harvest has probably been sold, or will be sold in the near term. Strong demand, both domestically and internationally, is providing growers with excellent market conditions.  The following sections highlight the current status of the barley market.

  1. Spot Cash Prices: The market for feed and malt continues to remain strong across North Dakota.  Feed prices currently range from approximately $4.70 to $5.50 per bushel. Malt prices currently range from approximately $6.00 to $6.50 per bushel. Spot cash prices have gained considerable strength over the past 2 years, as is evidenced in the following graph, which summarizes spot cash prices for feed barley and malt barley between January 2006 and January 2008.
  2. Market Factors: There are a number of interrelated factors impacting the market, including but not limited to the following:
     a) Europe experienced poor quality and low yields.  The European Union has evaluated importing barley from the U. S.
     b) Ukraine, which historically has accounted for approximately 16% of world exports, has reduced supplies due to poor yields and substandard quality. Ukraine has imposed export restrictions on its production.
    c) Australia continues to struggle with production problems, and thus has limited supplies available to export.
    d) Japan has purchased over 440,000 metric tons of feed barley from the U. S. in 2007, and is continuing to seek supplies from the U. S.  This has helped keep barley prices strong across the U. S.
    e) Canada experienced some harvest difficulty in 2007, and appears to be taking a cautious approach to supplying the export market
    f) Reduced supplies in Europe and Ukraine are stimulating the Saudi Arabian market to inquire to the U. S. for a supply of feed barley, which is helping to retain higher farm gate prices.
  3. Market Peak: Growers are seeking to determine when the market will peak. It is difficult if not impossible to determine when the market will reach its peak. As one grower stated, it is probably better to sell on the way up and take a profit at each price objective rather than try to hit the peak and risk losing the opportunity if the market drops rapidly.  Current information would suggest the market should remain stable with some upside potential, especially given the fact that wheat and barley will be competing for acres.
  4. Crop Budgets: The NDSU Extension Service released its 2008 crop budgets in January, and since the budgets were prepared, small grain prices have strengthened considerably.  As evidenced in the following table for North Central North Dakota, barley showed excellent profit potential, and has strengthened for even greater profit potential since the budgets were released. (see Projected 2008 Crop Budgets table below)
  5. Contract Prices: Production contracts for 2008 for both feed barley and malt barley are still available. For malt contracts, most pricing is linked to a formula developed by the malting company that is offering the contracts.  These formulas are typically based upon a percentage of the wheat futures market, with other factors included for subjective consideration (e. g. competitive prices from other commodities, input costs, etc.). Growers interested in contracting can contact malting companies or their local grain elevators to obtain more information. The recent surge in wheat prices has placed current malt barley contracts in the range of $6.80 to $7.30 per bushel.  Many contracts are offering storage payments in the area of $0.04 per bushel per month beginning at harvest.  Contracts should contain an Act of God clause.
  6. Production: The USDA-NASS small grains summary for 2007 provided positive news for barley.  Nationally, barley production was estimated at 212 million bushels, an 18% increase from 2006. Average yield per acre is estimated at 60.4 bushels per acre, only slightly below the 2006 yield by 0.7 bushels per acre.  Area harvested for grain is 3.51 million acres, which is a 19% increase from 2006.

Projected 2008 Crop Budgets North Central North Dakota

 

Spring Wheat

Malting Barley

Corn

Soybeans

Oil Sunflowers

Yield

32

55

80

25

1410

Price

$6.05

$4.81

$3.20

$8.33

$19.60

Gross Revenue

$193.60

$264.55

$256.00

$208.25

$276.35

Variable Costs

$109.23

$101.12

$174.73

$92.60

$127.48

Gross Margin

$84.37

$163.43

$81.27

$115.65

$148.88

The yield for sunflowers is in pounds per acre.  All other yields are in bushels per acre. The price for sunflowers is in dollars per hundred weight. All other prices are in dollars per bushel. Sources: Farm Management Planning Guide, published by NDSU Extension Service.

The table below  summarizes barley production for 2007 for key barley producing states.


State

Acres
Harvested

Yield
(bu/acre)

Production
(bushels)

North Dakota

       1,390,000

  56

77,840,000

Montana

         720,000

  44

31,680,000

Idaho

550,000

80

44,000,000

Minnesota

         110,000

  56

  6,160,000

Washington

         225,000

  60

13,500,000

 

Barley Price - Bottineau, North Dakota (January 2007 - January 2008)

barley02

Summary -- The current situation offers growers excellent opportunities for securing profit in barley. Most commodities are experiencing generally good prices at this point in time, and thus there is optimism for profitability into the upcoming 2008 production year.