Canada Markets

Oat Futures Send a Bullish Signal

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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December oats finished higher for the fourth consecutive session, while this continuous active chart shows Monday's high of $3.18 1/4 per bushel reaching the highest level traded since December, 2014. The middle study shows the Dec/March (blue line) and March/May (brown line) futures spreads inverted, while the lower study shows noncommercial traders increasing their bullish net-long position for the fifth time in six weeks. (DTN ProphetX chart)

It was a risk-off day in the commodity and equity sectors on Monday, although the oat trade was one market that stood out among other grains. The December oat contract closed 6 1/4 cents higher at $3.04 1/2 per bushel, its fourth consecutive higher close, while reaching its highest level traded since December in 2014 -- almost four years ago.

The attached continuous chart shows oats breaching the 38.2% retracement of the move from the contract's 2014 high to the 2016 low, while a sustained move above this level could result in a further move to $3.37 2/4 per bushel.

The move is supported by both the commercial and noncommercial side of the trade. The middle study shows the Dec/March spread ending at a 2-cent inverse on Monday (blue line, December trading over the March) after gaining 1 1/4 cents this session, while the March/May also surged by 3 1/4 cents to a 4 3/4-cent inverse (March ending over the May). This signals a bullish move on the part of commercial traders.

The lower study on the attached chart shows a histogram of CFTC noncommercial net-positions. The blue bars show this group adding to their bullish net-long position in five of the past six weeks, while as of Nov. 13, held a net-long position of 1,400 contracts, or the largest bullish position held since March of this year.

Canada's oat market will be an interesting one to watch. AAFC's November supply and demand tables forecast a 600,000-metric ton carryout for 2018/19 after being revised 25,000 mt lower in November, which would be the lowest level realized in six years. At the same time, the pace of movement is weighted on the front end. As indicated in a recent Canada Market blog, the current pace of movement (557,600 mt over 15 weeks) projects to a level of exports that is higher than the current 2.5 million metric ton estimate based on the five-year average pace of movement, a volume that may be limited only by available supplies.

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