Canadian oat prices have been weakening recently and that trend is expected to continue into the near future due to an expected record-large U.S. corn crop, a Vancouver oat market analyst says.
“Oats track corn,” said Randy Strychar of Ag Commodity Research. “It’ll continue to track it because there’s a strong statistical correlation between oats and corn futures.”
With U.S. corn prices looking extremely bearish for the significant future, it’s unlikely to see a rally from oats anytime soon, Strychar said.
According to the U.S. Department of Agriculture, the U.S. corn crop is on pace to produce a record 13.95 billion bushels. Add the favourable weather in the U.S. Corn Belt in recent days and the market has been extremely weak.
“Where the corn futures go, it’s likely that oats will follow unless there is a problem with our harvest in terms of quality,” Strychar said. “Right now, we’re probably looking at average to well-above-average crops in most regions in Western Canada.”
In the two largest oat-growing provinces, Saskatchewan and Alberta, crops are well above the five-year average in crop condition.
Alberta crops are rated 88.8 per cent good-to-excellent in condition, 26.8 per cent above the five-year average, according to Alberta Agriculture and Rural Development’s July 30 crop report.
The Saskatchewan ministry of agriculture’s report for Aug. 1 has oat crops rated 86 per cent good-to-excellent in condition.
Canadian oat prices won’t be affected by their own fundamentals until harvest, Strychar said, noting a decline in U.S. demand for Canadian oats could also play a factor in weaker prices.
“Eventually the harvest will put pressure on prices, but the larger mover for oats is still corn futures,” he said. “Supply and demand will play into the basis levels longer-term.”
“The U.S. is the largest importer of Canadian oats by far, bringing in 95 per cent of all exports,” Strychar said.
Oats are primarily used as feed in the U.S., but with corn and wheat crops looking good, demand is not as high as previous years.
As of Wednesday, Prairie Ag Hotwire has FOB farm old-crop oat prices topping out at $3 per bushel.
— Brandon Logan writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.