While the futures trended lower, the Lethbridge cash barley basis strengthened over the past two months. The cash market closed out the month of June trading roughly at par to the July WCE Western barley futures price after spending the entire crop year trading at a discount to the futures price. This is consistent with the trend seen over the past several crop years, where basis has generally weakened going into the fall and started strengthening through the spring and early summer. The Lethbridge barley cash price ended the month of June $2.00 per metric tonne over the July futures contract.
The drop in the new crop Western barley futures has been even more dramatic than the drop in the July contract month. The October 2004 futures contract price dropped nearly $30.00 per tonne during June, closing at $132.40, which equates to the contract losing approximately 18 percent of its value. Trade sources suggest that reasons for the drop in new crop prices include the anticipation of a large corn crop in the United States combined with most of the Canadian prairies receiving good moisture during the month, including many of the areas that needed it most. Bearish technical indicators also contributed to the price decline. Potential sources of price support could include overall strong demand for feed grains combined with relatively tight global stocks.
