Wednesday August 20, 2014

QUESTION OF THE WEEK

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Tight oat supplies keep bids supported on Prairies

Oat futures in Chicago and cash prices in Western Canada continue to hold up reasonably well as tight supplies underpin the commodity.

After dropping in sympathy with the CBOT (Chicago Board of Trade) corn market in late March, oat futures have since recovered from those losses to trade at roughly the same levels seen a month ago in both the old- and new-crop contracts.

Corn, meanwhile, has not shown the same recovery, and the spread between the two commodities has narrowed in.

CBOT July oats are currently priced at around US$3.92, which is $2.31 below July corn and a 90 cent per bushel improvement on the month. December oats come in at US$3.63, about $1.69 below corn. The new-crop oats/corn spread was roughly US$2.02 a month ago.

Spot bids for oats can currently be found in the C$4-$4.25 per bushel range in Western Canada, depending on the location and timing of delivery, said Ryan McKnight, of Linear Grain at Carman, Man. New-crop oats are currently priced at around C$3.50 per bushel.

"Both old- and new-crop are looking really tight," said McKnight, accounting for the relative strength in the oats market.

Looking ahead, the likelihood of seeding delays in many areas of Western Canada, due to the slow spring melt, could see oats displace intended wheat acres in some cases, said McKnight.

Some producers, he noted, were talking about holding back some of their old-crop oats to use as seed if needed.

However, any increase in oats acres may not translate into a significant improvement in supplies, as later-seeded oats can result in poorer quality and low test weights as they will be developing in the heat of the summer, said McKnight.

From a demand standpoint, demand for oats for human consumption is expected to continue to remain strong even if prices rise. However, the horse feed market is more price-sensitive and McKnight said current levels were pricing the commodity out of that market.

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


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