March oat futures closed higher for the fifth straight session, or the 10th time in 12 sessions on Tuesday. The March contract closed 2 cents higher at $3.13/bushel. Tuesday's session saw price move above the 61.8% retracement of the move from the contract's November high to December low, while failing to sustain a move above the 67% retracement at $3.14/bu.
As of Tuesday's close, March oats has gained 21 cents/bu. so far this month, well above the next closest grain future of Kansas City hard red winter wheat that has gained 11 cents/bu., while corn has gained 1 1/4 cents and soybeans have lost 13 1/4. Oats are currently showing leadership across the grains.
The March contract is in overbought territory, as seen with the in the first study, which may slow speculative buying. The blue bars of the histogram on the second study shows noncommercial traders paring their bullish net-long position in oats from a recent high of 3,264 contracts in late November to 1,687 contracts as of Jan. 7, the smallest bullish position held since September. Given the recent move in price, it is quite likely that this group has started buying again, although any bullishness may be tempered by the overbought futures.
The lower study shows the March/May futures spreads at a bullish inverse of 6 1/2 cents/bu., with the March trading above the May and a sign of commercial bullishness and focus on front-end supplies.
The January USDA report saw all forecasts left unchanged for oats for 2019-20. U.S. ending stocks are forecast at 36 million bushels (555,213 metric tons), the smallest carryout in six years. Stocks as a percentage of annual use are reported at 24%, while forecast to fall for a fifth straight year. In order to reach this forecast, imports are forecast at 95 mb, the largest imports in five years and up 9.7% from 2018-19.
The next major report to watch in Canada will be the Dec. 31 stocks report, to be released by Statistics Canada on Feb. 5. One feature to watch will be how the agency handles unharvested acres. The final crop reports released across the Prairies shows Manitoba's oat crop 99% harvested, Saskatchewan's crop 95% harvested and Alberta's crop 85.3% harvested. Based on Statistics Canada's harvested acre estimates by province and average yield forecasts, 164,234 acres were left unharvested, which would account for 240,616 metric tons using Statistics Canada's provincial yield estimates.
When this volume of production is taken from AAFC's current supply and demand tables, the entire 58% forecast increase in AAFC's ending stocks, from 412,000 mt to 650,000 mt, is jeopardized and could instead lead to a year-over-year drop in stocks. Forecast ending stocks for 2018-19 at 412,000 mt were already the lowest reported since 2001-02.
The Canadian Grain Commission's week 22 Grain Statistics Weekly shows exports through licensed facilitates of 808,400 mt as of Jan. 5, up 10.4% from last year and 39.9% higher than the five-year average. This is ahead of the 9.2% increase in imports forecast by the USDA for 2019-20, while well above the estimate for a 5.1% year-over-year increase forecast for 2019-20 by AAFC.
The volume of stocks held by licensed commercial facilities may signal that this movement will continue. As of week 22, commercial stocks totaled 286,400 mt, up 30.8% from the same week in 2018-19 and 45% higher than the five-year average. There remains a front-end push to own oats, also signaled by the inverted futures.
Since Dec. 26 when the March future hit its low of $2.83/bu., Saskatchewan Agriculture's weekly average No. 3 CW oat bid has increased by close to $12/mt to the Jan. 8 price of $197.24/mt, only $3.40/mt lower than reported for the same week in 2018-19. Manitoba Agriculture's weekly No. 2 CW bid was reported at $249.64/mt, up only $3.24/mt since Dec. 20 while $10.37/mt higher than one year ago.
Saskatchewan Agriculture's historical data points to weakness in cash prices in the first three months of the year. Over the past four years, their weekly bid has fallen by an average of $22.80/mt from the first bid reported in January to the last bid reported in March. This ranged from an $11.36/mt drop to a $30.25/mt drop.
This crop year could be different, with the Feb. 5 stocks report potentially playing a key role.
Cliff Jamieson can be reached at email@example.com
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