Market Insight: Oats steady

Over the past few weeks, oat cash prices have been basically flat in Western Canada with the
market well-balanced in terms of bullish and bearish factors, keeping prices between about
$3.50-$4/bu. Futures have been trading sideways as well, although the two don’t always track
each other that closely.

There is 50 cents/bu. variability between different buyers on any given day. Certain locations
in the eastern Prairie region (southern Manitoba) may pop a dime or two higher now and then
while bids in western Saskatchewan have been below the bottom end of the range. These

dynamics make it important to check with every possible buyer before deciding who to sell
oats to on any given day, including elevators, brokers and processors.

Going forward much will depend on the weather, but the outlook for oats remains fairly flat.
The final figures won’t be available for a few months yet, but analysts agree that western
Canadian oat acres will be down sharply in 2008. However, unlike the case of some other
markets whose seeded area dropped from last year, the impact on 2008-09 supplies and
pricing will be muted in the case of oats because the 2007-08 carryout will be high.
Consumptive demand for oats isn’t forecast to rise.

As a result, despite what appears to be a steep drop in acres, oat supplies look like they’ll be
adequate to meet end-user requirements next year, which limits price upside potential.

Furthermore, there hasn’t been a meaningful threat to yield potential in the main oat-growing
parts of the Prairies, where further beneficial rains are currently forecast. The harvested

percentage of seeded acres is also a key factor determining total oats production, which has
been climbing in recent years.

Oat price premiums pop up from time to time, helped by high corn futures prices (which oats
sometimes tracks), volatility in oats futures (allowing for higher-priced hedges to be placed
by some companies, which improves their cash bids), and local issues such as new sales being
made or trains needing to be filled quickly. Most in the trade agree these are likely to come
less frequently going forward, and that there remain ample oat supplies in the pipeline.

— The FarmLink Market Insight was researched and produced by FarmLink Marketing Solutions, a marketing advisory service for Prairie farmers, and is published here with permission of the authors.

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