Oats/corn spread narrows in, as oats rise

CNS Canada — Oats futures at the Chicago Board of Trade are currently at their strongest levels relative to corn since 2006, as Canadian logistics issues have caused nearby oats contracts to jump higher while corn values hold steady.

The March oats contract gained US16 cents per bushel on Tuesday to close at US$4.1675, only 15 cents below the March corn contract. At this time a year ago, corn was trading at closer to US$2/bu. above oats, which was more in line with historical averages.

Oats futures also continue to trade at an inverse, with the nearby months above the more deferred positions.

“It doesn’t mean there are higher prices in the country, as there are very few people actually buying oats,” said Ryan McKnight of Linear Grain at Carman, Man. on the relative strength in oats futures.

Linear, he said, was still buying oats “as we can get freight for them,” but he noted actual bids were very low compared to the futures, given the difficulties securing freight.

Fund buying and the fact that oats stocks in futures delivery positions are tight were playing a part in taking oats futures to “unhealthy highs,” McKnight added.

While North American oats supplies are large overall, the “oats are not in the futures delivery warehouses, so the threat of delivery isn’t there… If oats futures were set up the same way as canola, we’d have low oats futures and full carry.”

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

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