Higher Canadian barley prices are partially due to a drought-reduced crop across the prairies, with Statistics Canada estimating Canadian barley production for the 2002/03 crop year at only 7.28 million tonnes, down from 10.85 million tonnes in 2001/02 and 13.17 million tonnes in 2000/01. Trade sources suggest that the recent down-trend in nearby barley prices (since the end of October 2002) has been a function of mild weather which has limited demand, the relatively abundant availability of imported US corn and declining corn prices (since early October).
In recent months, the basis for Lethbridge cash barley (versus WCE Western barley futures) has been slightly lower than what was observed the previous two years. However, the basis levels are well within the range of values observed over the past five years and appear to be following the seasonal trends typically observed. Additional historical data regarding Lethbridge cash basis levels is available upon request.
Based on its relative nutritional value, feed wheat generally trades at a premium to feed barley in a given cash market. However, due to the differing par delivery locations (delivered Lethbridge for barley versus free-on-board central Saskatchewan for feed wheat), WCE western barley futures typically trade at a premium to feed wheat futures. Therefore, when following and/or trading the WCE feed wheat/western barley spread, it is important to understand the implications of the locational differences included in each of the contracts' specifications.
