Winnipeg Commodity Exchange: Feed Wheat Futures Prices Hit Record Lows In September

Feed wheat futures prices at the Winnipeg Commodity Exchange closed out the month of September at record lows. The October futures contract closed at $89.00 per metric tonne on September 30, a drop of $25.50 per metric tonne from the contract closing price on August 31. The drop equates to a decline of over 20 percent (see Chart 1). The October contract high was established on April 30, 2004 when the contract closed as high as $170.50 per tonne, meaning that new crop feed wheat futures have lost almost half of their value in the last five months. Reasons for the dramatic decline in feed wheat prices include the expectations of a very large percentage of the wheat crop in western Canada grading at feed quality due to poor growing and harvesting conditions combined with the anticipated record large corn crop in the United States.

The feed wheat futures price lows set at the end of September were not only October 2004 contract lows, but also the lowest close for the nearby WCE feed wheat contract since the par pricing region was moved from Thunder Bay to central Saskatchewan in July 2001 (see Chart 2). The previous record low was set in mid- July 2003 when the October feed wheat futures contract closed at $110.00 per metric tonne. The October 2004 contract first closed under the previous low on September 3, 2004 and continued to trend steadily lower, shedding another $21.00 per tonne through the remainder of the month.

The fall in feed wheat prices has partially been due to the price pressure seen on feed grains in general, as the CBOT new crop December corn contract closed the month of September very near its life of contract lows. However, the feed wheat price decline has been sharper than that of CBOT corn. In the middle of September the WCE feed wheat - CBOT corn spread traded at one of its largest discounts since the feed wheat par region moved inland (see Chart 3). Industry sources indicate that the price competitiveness of feed wheat to the overall feed complex could result in very heavy usage of feed wheat in livestock rations if the large discount continues.