Despite the low month-end closing price, Western barley futures have primarily been stuck in a relatively narrow trading range for several months. Since the middle of July the December contract has never closed above $128.50 or below $116.60 per metric tonne. This narrow trading range has held despite the fact that other feed grain prices have steadily eroded since the summer months, as indicated by the price of the CBOT corn futures contract. This divergent price action has caused the December WCE western barley futures contract to trade at a premium to the December CBOT corn futures contract after spending most of the year trading near even money. Some factors contributing to the price divergence is the harvesting of a record large corn crop in the United States and the sharp increase in the value of the Canadian dollar relative to the US dollar.
The WCE western barley - WCE feed wheat futures price spread continued an upward trend that began in August. The spread on the December barley and feed wheat contracts closed the month of October at its peak of $28.60 per metric tonne, the result of a sharp decline in feed wheat prices during the time that barley prices remained stuck in a trading range. One of the main factors contributing to the relative weakness of feed wheat prices compared to barley is the expectation of a very large feed wheat crop, with some analysts speculating that the percentage of the wheat crop grading as feed quality could reach as high as 40 percent.
