Domestic demand for Canadian rye has been flat for the last five to 10 years, but strong export interest for the commodity is seen to be keeping the industry afloat.
Local demand hasn't been more than steady because as the Canadian population ages, they seem to be drinking less beer and liquor, said John Pauch, a coarse grains analyst with Agriculture and Agri-Food Canada in Winnipeg.
Canadian livestock producers are also using less rye in feed rations than they used to, as they lean more toward barley, wheat, corn and oats for those needs, he said.
"If you can get a better price for rye industrially then it makes more sense to use it for that and then use cheaper coarse grains for feed," Pauch said.
However, total usage of Canadian rye and average prices have managed to go up because of strong export demand, as Canada is the No. 1 exporter of rye in the world, he said.
Canada's two biggest rye export customers are the U.S. and Japan. Both countries mainly use the grain for distilling alcohol.
The 2011-12 average price for Canadian rye is up about 30 per cent when compared to the same time last year, Pauch said.
The average price for rye for 2011-12 is $175-205 per tonne, which compares to the average price in 2010-11 of $147 per tonne, according to an AAFC supply and demand update that was released last Thursday.
"We're getting down to very low carry-out stocks so the price has been reflective of that," Pauch said.
The reason why supplies of rye are so tight is because of poor production in recent years, he said, as seeding conditions were less than ideal in the falls of 2009 and 2010.
However, Pauch said recovery is starting to be seen in some Canadian growing regions.
"The crop got such an early start this year that producers will probably already begin harvesting new-crop rye in the next few weeks."
Pauch said the average price is expected to decrease slightly in 2012-13, but not as much as those of other Canadian coarse grains.
The average price for rye is expected to decrease to $165-$195 per tonne in 2012-13, according to the supply and demand update.
"Rye is still going to remain in tight supply, and there's fairly inelastic demand for it so no matter what the price is, they'll pay it," he said. "That's because for some products they're not going to find any substitutes to replace the rye."
--Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.