September 1995 will likely be remembered as a good month at the Winnipeg Commodity Exchange.
Some of the exchange’s futures and options contracts basked in the glow of a generally bullish commodity outlook. Contract highs were established in western domestic barley futures, feed wheat, oats and flaxseed.
Of the lot, western barley futures, which has its delivery point in Lethbridge, Alta., could easily be classed as the star. The statistics department of the exchange said all the contract months – November of 1995 and February, May and August of 1996 – reached contract highs.
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Better yet, number of trades during September increased by 25.5 percent and open interest was virtually steady with September of 1994.
John DePape, director of marketing for the exchange, attributes much of western barley’s good run to the short supply this summer.
“I’ve been told the way to kick a futures contract is for there to be a shock to the cash system,” he said, adding buyers and sellers scramble for cover, often finding it in the futures market.”It’s showed itself to be the hedge tool it’s supposed to be.”
Liquidity is fine in the western barley contract, but the same can’t be said of Canadian barley.
With just a few more than 1,000 trades in all of September for Canadian barley, versus 20,250 for western barley, there’s no doubt about the winner.
DePape suggests one reason is that western barley is more “farmer friendly.” Its delivery point is fixed in Lethbridge, but delivery can be backed off using truck freight virtually anywhere on the Prairies.
But the primary reason for western barley’s dominance, DePape speculates, is Alberta’s dominant role in the feed barley market and the liquidity that creates.
The decline of the Canadian barley contract has triggered a task force at the WCE to re-examine the two contracts.
The oat futures contract, like Canadian barley, is trading small volumes. Trades in September stood at 1,659 versus 4,387 in September last year.
The oat contract is suffering a hangover from the change in the Crow Benefit, DePape said, and its Thunder Bay delivery point no longer reflects the commercial flow of western Canadian oats to the Minneapolis cash market.
But unlike Canadian barley, another task force is working on revamping the oat contract. DePape said he expects announcements in about a month regarding changes to the oat contract.
