Western Canadian oats have seen a bump in value over the past few weeks, as logistical issues across the Prairies have been bullish for prices.
“It’s been pretty volatile,” said Ryan McKnight, grain merchant for Linear Grain at Carman, Man. “Prices strengthened over the last couple of weeks, because there’s not a lot of oats in delivery locations at the moment.”
With Western Canada producing extremely large crops, there have been noticeable delays getting crops moved to ports via railways.
“With the railway operating the way it is, the market’s not getting oats, so we’re seeing a December run-up,” McKnight said. “Prices are pretty strong, but the market’s inverted. If you can get wheels underneath the oats, you can get a good price for it. That’s the biggest problem.”
The inverted futures prices, which mean nearby contracts are more valuable than the ones further down the road, are putting even more pressure on producers to sell their oats instead of holding on to them.
“This usually happens when there’s a short supply, or the market needs grain,” McKnight said. “It inverts to penalize people who carry grain.”
The December contract on the Chicago Board of Trade was valued at US$3.3650 per bushel at the close on Tuesday, compared to US$3.1925 per bushel for the March contract.
However, McKnight said, there is a possibility that the rally in prices could stop if the relationship between oats and other feed ingredients gets too big.
“It absolutely kills feed demand if oats are too strong in relationship to other ingredients,” he said. “So based on the current relationship (with other feed markets), we’ll likely see less oat feeding going on.”
As of last Friday (Nov. 8), Prairie Ag Hotwire had FOB farm oats valued at C$2.50-$2.80 per bushel.
— Brandon Logan writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.