Of the nine market types that Senior DTN Analyst Darin Newsom has identified in past work based on the behavior of both commercial and noncommercial traders, the oat market could be viewed as a Type 1 or bullish market. This is indicated by the bullish signals coming from the commercial and noncommercial signals being displayed in this market.
As seen on the third study of the attached chart, the brown line represents the May/July spread that has remained in inverted territory (May trading over the July) since Jan. 18. Today's closing spread of five cents is near a test of the highest levels seen since January, with today's intra-day high of 6 1/4 cents extending higher than the Jan. 19 high of 6 cents. This inverse signals a strong front-end commercial demand relative to later in the crop year.
The blue bars on the histogram on the lower study points to a growing net-long futures position held by noncommercial traders or investors. The latest CFTC data as of Feb. 28 shows the net-long position jumping 90% from 292 contracts as of Feb. 21 to 554 contracts on Feb. 28. Investors have held a bullish net-long position for six consecutive weeks, nearing a test of the longest period of net-long positions held in over a year, while the 554 contracts held being the largest net-long held since November.
The support of both commercial and noncommercial demand resulted in Monday's low bouncing off the blue trend line drawn from the contract's September low. Resistance lies at last week's high of $2.50/bu. as well as the Feb. 13 high of $2.60 3/4/bu. The continuous active chart would also point to the March contract's Feb. 23 high of $2.68 1/2/bu. as a further hurdle, with the breach of these levels pointing to a potential test of retracement resistance at $2.81/bu., the 33% retracement of the move from the March 2014 high to the contract's September 2016 low.
Thursday's monthly USDA supply and demand release will be watched for signs of increased demand in the U.S. market this crop year. The February report resulted in a 5-million-bushel increase in expected United States imports to 95 mb (1.465 mmt, June-May crop year) after holding this estimate steady at 90 mb since September. This still remains slightly lower than the five-year average, while Canadian Grain Commission data shows 773,200 metric tons exported through licensed elevators as of week 30 (Aug-July crop year) or as of Feb. 26, primarily to the U.S. which is a five-year high for this week and 18.6% higher than the five-year average. As of December, a further 329,102 mt of unlicensed exports are also reported since Aug. 1, 10.4% higher than the same period last year.
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Cliff Jamieson can be reached at email@example.com
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