Little upside in oats as futures hit five-year lows

CNS Canada –– Oats futures in Chicago are trading at their lowest levels in five years, and cash bids in Western Canada are also doing little to encourage farmer selling.

September oats at the Chicago Board of Trade settled Monday at US$2.2325, the lowest close for the front-month contract since June 2010.

Cash bids are currently just under C$3 per bushel in Manitoba and around $2.25 in northern Saskatchewan, said Ryan McKnight of Linear Grain at Carman, Man.

While he said basis levels were historically strong compared to the futures, there is still “just zero interest from farmers.”

Manitoba farmers were likely holding out for bids of $3.25 per bushel, McKnight said, while the magic number was closer to $2.75 per bushel in Saskatchewan.

However, he was uncertain if there was much chance of hitting those levels in the near term, especially as harvest pressure picks up.

While Canadian supplies could be tight, overall North American supply/demand fundamentals may be a little more burdensome. McKnight said the U.S. had a better-quality crop, which means more will be harvested and delivered to mills rather than going to greenfeed.

The weak Canadian dollar and strong U.S. dollar are also hurting the freight costs of shipping oats by rail to the U.S., with it being cheaper for U.S. buyers to source Scandinavian oats in some cases, he said, noting rail freight is priced solely in U.S. dollars.

“Oats are either underpriced or overpriced,” said McKnight. “It’s a thinly traded market.”

Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.

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Phil Franz-Warkentin writes for MarketsFarm specializing in grain and commodity market reporting.

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