Oats show firmness, upside likely limited

(Resource News International) — Oats prices in both the Chicago futures and western Canadian cash markets have shown some improvement off nearby lows in recent weeks, but the fundamental outlook remains neutral to bearish, which may limit any further strength.

After setting a low of US$2.05 3/4 per bushel in the May CBOT oats contract on March 25, the futures have shown some steady strength, with the May contract closing at US$2.18 per bushel on April 12.

Cash bids in western Canada have been tempered by the strong Canadian dollar, but currently top out at C$2.47 per bushel in Alberta, C$1.76 in Saskatchewan, and C$2.07 in Manitoba, delivered to the elevator, according to Prairie Ag Hotwire data.

Ryan McKnight, an oats merchant with Linear Grain at Carman, Man., said the largest players in the oats futures market right now were the funds, and they were likely covering some of the large short positions they’d developed.

However, “on anything fundamental oats are neutral to bearish,” according to McKnight.

Exports were down significantly, which were increasing the carry-out potential, he said. Mill demand in the U.S. was also said to be down.

“The longer grain stays in farm bins or non-commercial hands, it just perpetuates low prices,” McKnight said.

Looking ahead to the spring of 2010, McKnight said oats were still looking to be a favourable cereal crop option for producers.

While canola still pencils out better overall, he noted oats do compare favourably to wheat and other grains.

About the author


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


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