Barley production forecast to increase in 2012

2011-12-28T08:17:00Z 2011-12-28T08:20:33Z Barley production forecast to increase in 2012By DALE HILDEBRANT Farm & Ranch Guide Farm and Ranch Guide
December 28, 2011 8:17 am  • 

 

Better times lay ahead for the barley industry in 2012, according to Steve Edwardson, executive administrator of the North Dakota Barley Council. But to better understand the challenges that face the industry, it's necessary that we review the 2011 growing season.

"Prevented planting due to excessive moisture, and crop enterprises that provided better profitability, plagued barley production in 2011," Edwardson said. "This past year has been full of challenges, many of which have negatively impacted barley production in North Dakota."

For instance, planted acres in North Dakota fell by 44 percent in 2011 to 400,000 acres compared to 720,000 planted acres the year before. Harvested acres in the state also fell, from 670,000 acres in 2010 to 350,000 in 2011 representing a 48 percent decrease. 

The lower acreage, in concert with less than desirable growing conditions, resulted in a 62 percent decline in barley production in the state in 2011, with production estimated by NASS field office at 16.45 million bushels compared to 43.55 million bushels in 2010.

The final piece to the 2011 barley production puzzle is the supply and demand report.

"The USDA barley supply and demand report indicates ending stocks forecast at 55 million bushels for the January estimate for 2011-2012, a decrease of 38 percent from the 89 million bushel ending stock level for 2010-2011," Edwardson said. "Consumption of carryover inventory, coupled with decreased production is placing stocks at near record lows."

Contract prices for 2012 are currently being offered in the $6.25 to $6.75 a bushel range, Edwardson noted, however late fall contract price offerings were in the area of $7 per bushel.

"Growers have indicated these prices are competitive," he said, "but they remain concerned about the downside risk of discounts from not achieving malt quality specifications.

"Discounts erode profit and the downside risk of selling malting barley for feed barley discourages growers from producing barley when other crops provide less risk. Commitment of on-farm storage to a given crop for several months can also impact crop selection decisions. These challenges are real but not necessarily insurmountable for barley production."

Edwardson also noted that the continued strength in the corn and wheat markets will place pressure on barley production decisions for the 2012 crop year.

Current cash prices for both feed and malting classes in North Dakota have gained modest strength given the decreased levels of production, he noted. Current spot cash prices for malting barley range from $6.25 to $6.50 per bushel. This compares to early post-harvest prices of $6.60 to $7 a bushel, which indicates carryover inventory is being secured. Feed barley cash spot prices are currently in a range of $4.50 to $5.15 a bushel.  

Trend and outlook are conflicting. The long term trend for U.S. barley acreage has been in a decline since the mid-1980s, Edwardson said. The trend line indicates barley has been decreasing in the U.S. at an average rate of approximately 312,000 acre per year since 1987, according to NASS data.

"If this trend were to continue, barley could be extinct in the U.S. in seven to 10 years," he said. "The data clearly demonstrates that growers are selecting crops other than barley, and thus fundamental adjustments in business practices will be needed to keep barley viable."

On the bright side, crop budgets for 2012 indicate that barley is one of several viable options. However, supplies of barley planting seed are very limited and will impact regional planting decisions if growers cannot secure seed.

"Growers are guardedly optimistic about barley for 2012, a year that will test the entire barley supply chain for consistency and profitability,"he said.

 

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