The Lethbridge cash barley price has remained well correlated to the futures price throughout this upward trend. Since October, the Lethbridge cash barley price basis to the nearby futures has ranged from a $3.40/tonne discount to a $1.60/tonne premium. Meanwhile, the western barley futures prices showed a range of over $22.00/tonne during the same period.
The price movements in the western barley market have been supported by an increase in trade volume. The average daily pit trade volume during the month of November was 1,790 contracts compared to 1,260 contracts in November 1999. Looking at calendar year-to-date, the average daily pit volume has been 1,060 contracts up from 845 contracts during the same period of 1999.
Since the Oct 2001 western barley contract was listed on October 23, 2000, the spread to the Mar 2001 contract has narrowed from $7.60/tonne in early November to $0.20/tonne on November 24, 2000. More recently, the spread widened, ending the month at $3.20/tonne. The narrowing of the Mar/Oct spread was a function of increased demand for barley (due to factors including the introduction of an import duty on U.S. corn and a stronger Canadian Wheat Board export program, according to trade sources).
The spread between WCE western barley futures and CBOT corn futures prices has shown significant volatility over the past year. The Dec 2000 futures spread has ranged from a $29.65/tonne discount for barley in May 2000 to a $6.62/tonne premium in August 2000. Over the past month alone, this spread has gone from approximately a $5.00/tonne discount to a $5.00/tonne premium, highlighting the risks associated with a barley/corn cross hedge.
