Oats prices drop to two-and-a-half-year lows

(Doug Wilson photo courtesy ARS/USDA)

CNS Canada –– Oats prices at the Chicago Board of Trade dropped to their weakest levels in two-and-a-half years over the past week, and cash bids in Western Canada have followed suit.

While the largely speculative price drop could bring in more bargain-hunting demand, both end-users and farmers have moved to the sidelines for the time being.

The nearby December oats futures in Chicago have lost about 40 cents per bushel over the past week, and the front-month contract settled Tuesday below $3 per bushel for the first time since June 2012, at $2.99 (all figures US$).

The more active March contract settled Tuesday at $3.09 per bushel.

The recent selloff in the futures was tied to “a combination of large stocks in deliverable warehouses, and possibly funds reducing their longs,” said Ryan McKnight of Linear Grain at Carman, Man.

The milling market was well supplied in the short term, he said, with basis levels already having widened out before the futures drop.

“We’re not expecting to be real busy in oats, unless farmers decide they want to sell them at the new pricing,” said McKnight.

He expected farmers will dig their heels in and won’t sell. “Anybody who needs to buy them will have to pay up, basis-wise, to get them.”

Stronger oats prices earlier in the year also removed much of the elastic feed demand from the market, which could conceivably start to come back if the price spreads start to look more favourable for oats once again, McKnight said.

In addition to the possibility of feed demand, the oats supply/demand balance is also still projected to be relatively tight by the end of the crop year, which could be supportive in the long run.

Current cash bids are wide ranging in the countryside, with many buyers only putting out a “stink bid” that they didn’t really want to fill, said McKnight.

Linear was always looking to bring in more oats, he said, with spot bids from the company currently around C$2.35-$2.40 in Saskatchewan and C$2.85-$2.90 in Manitoba.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

 

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