Oat prices stable despite ‘bearish’ StatsCan report

Statistics Canada’s crop production report last week should have been bearish for Canadian oat spot prices, but continued logistical issues appear to have kept prices relatively stable.

“It’s shrugged off the outrageously bearish StatsCan numbers,” Ryan McKnight, grain merchant for Linear Grain at Carman, Man. said of the market. “Basis has weakened slightly lower by probably a dime to 15 cents since the report, but nothing’s really changed.”

According to StatsCan, oat production is pegged at 3.888 million tonnes for 2013-14, significantly higher than the 3.225 million to 3.400 million tonnes economists were expecting. If the estimate holds, the 2013-14 oat crop will be over one million tonnes larger than 2012-13′s.

“It’s a logistics thing. Prices will stay firm and the market should stay inverted if we’re not getting much grain to the market,” McKnight added.

At the close on Tuesday, oat futures on the Chicago Board of Trade remained inverted, with the December contract valued at US$3.76 per bushel, the March contract at US$3.36 and the May contract at US$3.22.

Increased demand from the U.S. has also given prices an additional bump upward, McKnight said, noting some areas in the U.S. have small stocks.

“There’s not many oats in delivery locations,” he said. The futures delivery locations don’t have a lot of oats in inventory and I think millers are getting the oats very hand-to-mouth.”

However, despite good demand from the U.S., Mexico could decrease its Canadian imports due to the strong prices.

“Mexico is a price buyer,” McKnight said. “My guess is they will be able to buy oats cheaper from Australia.”

Looking forward to the New Year, he said prices should finally begin to decline.

“I have a hard time seeing these values staying where they are and chances are they will decline, because the spread between oats and commodities is very narrow,” he said. “Basically you’re going to kill off a lot of the feed demand, because oats are just too expensive to feed.

“Feed use is going to decline and that’s probably why the carry-out numbers are predicted to be so high.”

Prairie Ag Hotwire has FOB farm oat prices pegged between C$2.50 and $2.85 a bushel as of Monday.

– Brandon Logan writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

Related story:
StatsCan shows shockingly large crops all around, Dec. 4, 2013