(Resource News International) — Oats futures at the Chicago Board of Trade (CBOT) have seen some considerable strength over the past week, following the release of production numbers from Statistics Canada confirming Canada’s smaller crop.
However, large old-crop supplies overhanging the market are expected to keep bids in the country from seeing much upside for the time being.
Canadian 2009-10 oats production was estimated at 2.967 million tonnes by Statistics Canada in its Aug. 21 crop estimates. The forecast was at the low end of trade guesses and well below the 4.272 million tonnes grown the previous year.
Oats bids in Chicago have increased sharply since the release of the StatsCan numbers, despite a relatively steady tone in the corn market. The December contract closed at US$2.29 3/4 per bushel on Wednesday (Aug. 26), up nearly 13 cents over the week.
December corn, meanwhile, was down by a cent on the week.
Oats have largely shrugged off any weather premiums to this point, with large old-crop supplies and the big U.S. corn crop dominating the market, said Terry Tyson of Grain Millers Canada at Yorkton, Sask.
The recent strength in oats futures could be a sign that commercial buyers were making purchases, he said, although most of the activity was likely fund-related.
Tyson thought some of the trade was of the opinion that the StatsCan oats numbers may have been overstated, with actual acres and production likely lower.
The smaller Canadian crop should eventually leave some room to the upside in cash bids. However, Tyson said, the large North American old crop will likely limit any upside until those supplies are worked through.
Most mills in the marketplace were covered through November, with some buyers full into January, he said. As a result, oats buyers will be waiting to make purchases until they need to, especially if they need to pay more.
The key to price action farther out will be the weather over the next few weeks. If there is a big frost, or if there are other problems at harvest, oats prices could see some strength sooner, said Tyson. The bulk of the crop will need until the middle of September without a frost in order to come in without problems, he added.
Cash bids for oats, delivered to the elevator, can currently be found as high as $2.17 per bushel in parts of Alberta, $2.09 in Saskatchewan, and $2.07 in Manitoba, according to the latest Prairie Ag Hotwire data.