Canada Markets

Investors Push Oat Futures Higher

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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December oats finished lower on Thursday, although continue to reach higher highs and remains poised for its third consecutive weekly gain on the continuous active chart. Thursday's high fell just pennies away from testing the 2018 high on the continuous chart, while also failing at retracement resistance of $2.77 1/4 per bushel. The lower study points to a weakening December/March futures spread, a sign of growing commercial bearishness. (DTN ProphetX Chart)

The December oat chart deserves a look after a second week of potential gains, pending Friday's close. Over the week of July 30, the December contract gained 17 3/4 cents, or 7.4%, to close at $2.57 per bushel (bu), while as of Thursday, has gained an additional 13 3/4 cents, or 5.4%, to close at $2.70 3/4/bu, after trading as high as $2.78 3/4/bu on Thursday's session. Thursday's session saw the December contract end 2 1/4 cents lower, after coming just 2 cents away from taking out the February 2018 high and reaching the highest level traded since mid-November on the continuous chart.

As seen on the attached chart, Thursday's high failed at retracement resistance of $2.77 1/4/bu, the 67% retracement of the move from the July 2017 high to the April 2018 low on the continuous chart.

While not shown, it is interesting to note in July 31 CFTC data than neither commercial nor noncommercial traders were heavily invested in oats. Commercial traders held a modest net-short futures position of 593 contracts, the first week-over-week reduction in six weeks, while noncommercial traders, or investors, held a modest net-long futures position of 171 contracts, having fallen over the past two weeks.

It is also interesting to note in the lower study, which represents the December/March futures spread, that commercial traders were buyers last week or the week of July 30, while this week are bearish sellers. The Dec/March spread has weakened 2 1/2 cents this week to minus 5 3/4 cents, the weakest spread seen in over three months.

While the stochastic momentum indicators (middle study) suggest that a higher move may be possible before prices reach overbought territory on the continuous chart, as they do on the December chart, the current risk is that investor, or noncommercial, buying slows and prices fail to sustain the current upward trajectory.

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