Canada Markets

CBOT oat futures staged a rally from their June 12 low of $2.76 per bushel to a high of $3.97 1/2/bu. the week of August 27. Since then, trade has been range-bound, largely between $3.60/bu. and $3.96/bu. Support seems to exist around the 23.6% Fibonacci retracement level of roughly $3.69, although trade took place below this level in the past two weeks.

Today's close was at $3.68 3/4/bu., just slightly below this level of support. November trade has also seen the future close below its 20-week moving average for the first time since late June. Overall, price action has been negative from a technical perspective.

The U.S. situation is suggested to be a carbon-copy of the 2011/12 marketing year. U.S. production is forecast to be up 19% from last year, while supplies are said to be similar due to lower carry-in stocks. Imports and domestic use are forecast to be relatively unchanged from last year. Ending stocks in the U.S. are forecast to fall by 9%. Given the outlook for U.S. oat markets to be most similar to last year, any potential strengthening in cash prices will be a result of spill-over from the corn market.

Cash markets for oats on the Prairies, however, continue to firm. The attached chart indicates 3 CW oats instore Saskatoon are at the highest levels seen this year, reaching $210.06/mt for 3 CW oats delivered Saskatoon as of November 21, according to Saskatchewan Agriculture data. While oat futures are trading flat with somewhat negative technical signs, cash oats are showing strength.

Week 16 CGC data indicates Canadian oat exports to be behind 2011/2012 by 10.3%, although 4.3% ahead of the three-year average. Farmers have not been aggressive sellers this fall while waiting for price improvement. Producer deliveries are 16.8% behind 2011/12 deliveries as of week 16, while 9.8% ahead of the three-year average. Visible stocks are much tighter than normal, at 24.6% tighter than 2011 and 17.9% behind the three-year average.

A sustained rally in oats may be difficult to achieve given the sideways trade seen in corn futures.

Cliff Jamieson can be reached at cliff.jamieson@telventdtn.com

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