Oats supplies continue to overhang market

(Resource News International) — Large supplies should continue to keep oats prices in Western Canada under pressure heading into the new crop year, especially as the burdensome stock situation is unlikely to be alleviated anytime soon and other grains are also showing weakness, according to an oats merchant.

Canada is on pace to carry out 1.2 million tonnes of oats at the end of the 2008-09 crop year, which would be up from 975,000 in 2007-08, according to Agriculture and Agri-Food Canada data.

Ryan McKnight of Linear Grain at Carman, Man. said farmer deliveries are down considerably on the year, which should result in producers holding “burdensome” oats supplies into 2009-10.

Looking at weekly data from the Canadian Grain Commission, farmers had delivered 1.1 million tonnes of oats into the commercial system as of Feb. 1, 2009 — well below the 1.5 million tonnes delivered at the same point the previous year.

Current spot bids are in the $2 to $2.25 per bushel range in southern Manitoba, while new crop prices aren’t much better, hovering near $2.35 per bushel, according to McKnight.

Nearby oats prices in Saskatchewan and Alberta are below $2 for the most part, while new-crop prices are closer to the Manitoba prices, according to Prairie Ag Hotwire data.

McKnight thought slightly lower acres and a return to more normal yields would help ease the large supply situation in 2009-10. However, he added, oats prices are unlikely to see much strength, as the market will largely react to movements in U.S. corn.

“They’re upping the (U.S. corn) ending stocks every time I see a chart,” McKnight said, pointing to lower feed usage, declining ethanol use and large global supplies of lower-quality wheat.

McKnight said farmers weren’t showing much interest in pricing old- or new-crop oats at current levels. He expected sales would eventually pick up to meet cash flow needs, but added that any increase in farmer deliveries would likely weigh on prices.

“My advice to farmers is that if you can still see some profits on your costs, sell it; don’t worry about what you got last year,” said McKnight. He also recommended putting on minimum price contracts, which allow the producer to remain open in the market but have a base price.

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