As seen following the 2021 drought, increased feeding of corn and wheat is supposed to help according to AAFC. The problem: The extra use from those two sources hardly compensates for the decrease in oat availability, let alone offset lower barley use. Reduced corn imports from the United States and an excellent quality wheat crop are part of the problem.
Corn FWD use is projected to be 141,400 mt above last year, thanks entirely to increased carry-in stocks from 2022-23 crop year. Imports are expected to fall to 2.5 mmt from 2.788 mmt last year and Statistics Canada in September suggested the Manitoban corn crop would be 6.5% lower based on reduced acres with the national crop expected to be down 1.6%.
Following the drought of 2021, corn imports from the U.S. surged to 6.142 mmt from 1.639 mmt the year before. An ugly U.S. corn basis, a Canadian dollar trading between 78 and 79 cents US and plenty of excess capacity on our rail system (due to the small crop) all helped. None of those are in play currently, leaving U.S. exports to Canada at multi-year lows so far. Total commitments (exports plus outstanding sales) to Canada stood at 80,000 mt as of Nov. 14, compared to roughly 800,000 mt last year according to USDA data. Even the 2.5-mmt import level may be difficult to achieve.
Wheat (ex-durum) FWD use is projected to rise 122,300 mt according to AAFC, even though production is expected to fall year-on-year and quality is much above normal. Increased feed prices are usually the only thing that does that, especially given the strong export pace.
A small oat crop for a second year in a row offers no assistance with FWD use expected to fall 200,000 mt according to AAFC. This one will be interesting, given the light test weight seen from the eastern Prairies region. Total production should fall when Statistics Canada gives its final update on Dec. 5, but it would make sense that more of the light oats will eventually end up in feed rations. If so, it will likely take time for government agencies to pick up on.
Bringing the feed alternatives together, even with the optimistic assumption being used by AAFC, FWD use from the four sources is expected to be 19.626 mmt, down from last year’s 19.917 or 291,500 mt. No room for error.
Prices have responded somewhat along with the bounce in U.S. corn values. According to PDQ, southern Alberta feed barley values have increased from a low of $248.61 mt ($5.41 per bushel) set in late August to $282.92 ($6.16) currently. On a sustained rally, resistance could be seen at an old support level of $350 mt or $7.62 per bushel in the spot market.
Economic theory would suggest it will take higher prices to slow exports and make it economically feasible to increase corn imports from the U.S. to offset any assumptions that may be off. Being patient and making incremental sales that reward rallies along the way continues to appear to be an appropriate marketing strategy for sellers at this point. Feed users may well want to use any setbacks to secure supplies.
Mitch Miller can be reached at [email protected]
Follow him on social platform X @mgreymiller
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