Focus On Winnipeg Commodity Exchange Western Barley Futures

The May 03 western barley futures price closed out the month of April at $165.50 per tonne, near the contract low of $162.00 per tonne set on April 28, 2003. Despite the drought-reduced crop in western Canada, WCE western barley futures prices have been declining steadily since the highs set in early November 2002. One factor contributing to the futures price decline is the fact that some feed grain users have been substituting supplies with alternate feed grains other than barley. This substitution has resulted in a record estimated 4.4 million tonnes of imports of corn from the United States into Canada during the 2002/03 crop year. While at the lowest levels of the crop year, western barley futures prices remain above levels seen in the past several years.

Basis levels for Lethbridge, Alberta cash barley have been between $5.00 and $10.00 under the nearby western barley futures price for most of the 2002/03 crop year. However, basis levels have been working their way steadily upward since early February 2003 to where Lethbridge cash prices were trading above the western barley futures price at the end of April. This remains consistent with the trend of the previous two crop years, where basis has tended to strengthen through the late winter and spring months.

New crop October barley futures have been declining steadily since peaking in mid-January. This is part of an overall decline in the price of new crop feed grains, as the price of the new crop December 2003 CBOT corn futures contract has also fallen steadily since the beginning of the year (see Chart 3). Despite a slight decrease in the estimated area seeded, Canadian barley production is expected to increase by 82% in the coming crop year according to Agriculture and Agri-Food Canada due to higher expected harvested area, improved yields and a lower abandonment rate. Other factors contributing to the price decline include improving moisture conditions across most of the Canadian prairies as well as a surging Canadian dollar, which makes imported US corn more competitive.