Despite a large 2013-14 crop, Canadian oat prices continue to remain stable well into the winter as logistical issues moving grain across the Prairies are seen as bullish.
“It’s 100 per cent logistics related,” said Ryan McKnight, a grain merchant with Linear Grain at Carman, Man., speaking of current prices. “The contract execution risk is starting to get too high, so I think a lot of companies are backing away from buying more grain from farmers and are concentrating on getting their contracts moved.”
Oat futures on the Chicago Board of Trade as of Tuesday remained inverted, with the March contract valued at US$3.635 per bushel and the May contract at US$3.285.
U.S. demand for Canadian oats remains extremely high, McKnight said, adding that they are hard to come by as grain companies are choosing to move other commodities instead.
“There’s very few oats in futures delivery positions,” he said. “I think there are some elevator grain companies prioritizing which commodities they want to ship, and I would assume that would be anything they can put through their ports.”
However, demand in the feed market is not expected to be strong, as other feed alternatives are cheaper than oats as of the New Year.
“I just can’t see the feed demand being all that great,” McKnight said, noting the U.S. harvested a record large corn crop. “Corn is cheaper (in comparison to oats). Oat prices from a futures standpoint have really held in.”
Looking ahead to the spring, McKnight said it’s inevitable that logistics will continue to play a role in the value of oats on both sides of the border.
“Well, we have a massive crop and I think it’s going to be an ever-continuous fight for logistics,” he said. “I think there’s going to be lots of oats carried over, so I think the only way logistics will catch up is if we have a poor crop.”
FOB farm oats in Western Canada were valued Monday between C$2.30 and $2.60 per bushel, according to Prairie Ag Hotwire.
– Brandon Logan writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.