December oats gained 24 1/4 cents bushel (bu) Sept. 15 to reach, not only a fresh contract high, but also the highest level ever traded on the continuous active chart. This was the largest one-day move realized since Aug. 13, or just over one month. September 16 trade resulted in a further gain of 12 1/4 cents to a close of $5.51 1/2 bu, after reaching a fresh contract high of $5.64/bu.
The continuous chart shows a high of $6.00 reached on the March 2014 contract, achieved on March 10, 2014, just prior to expiry. The continuous active chart shows Thursday's high of $5.64/bu as the all-time high.
The brown line on the attached chart shows the Dec/March spread moving from trading at even money on Sept. 9 to a 6 1/2 cent spread as of Sept. 16, close to the 7-cent inverse reached on Aug. 13. This is not only signaling a bullish view of oat fundamentals, but also a rapid change in this view.
While not shown, the noncommercial trade has increased their bullish net-long position in five of the past six weeks to a bullish net long of 885 contracts as of Sept. 7. The speculative crowd hasn't played a major role to date when compared to the 2020 high of 2,682 contracts net long and a 2019 high of 3,409 contracts net long, although this could lead to an even greater move should they step back in.
On Aug. 30, Statistics Canada estimated Canada's 2021 oat production at 3.070 million metric tons (mmt) based on the July model, down from 4.5758 mmt produced in 2020. On Sept. 8, Statistics Canada estimated July 31 stocks are 659,000 metric tons (mt), above expectations, 55% higher than July 31, 2020, and the highest ending stocks in three years. The relief was short lived, with the September Statistics Canada production estimate based on the August model leading to a production estimate of 2.579 mmt, the smallest production since 2010. A concern remains that production will be revised even lower when the actual acres harvested are calculated, as more than normal acres are salvaged for feed.
A combination of the July 31 stocks and the most recent production estimate leads to crop-year supplies of 3.238 mmt, down 35% from 2020-21, and would be the tightest supplies since the 1991-92 crop year. To compare to the previous crop year, 2020-21 Canadian exports reached an all-time high of 2.928 mmt (grain plus products), while domestic disappearance totaled 1.4313 mmt.
Since USDA released their first 2021-22 forecasts in the month of May, they have pared their forecast for oat imports for both the 2020-21 and 2021-22 crop years. Overall, 2020-21 imports have been pared by a modest 5 million bushels (mb) (77,113 mt), while U.S. imports for 2021-22 have been pared by 22% from 95 mb to 74 mb (1.141 mmt) as the pool of available imports shrinks in size.
Canada's oat stocks were expected to reach an all-time low in 2020-21 as seen in AAFC's unofficial estimates, but this will certainly be the situation in 2021-22. U.S. stocks are estimated by the USDA at 27 mb (416,410 mt), the lowest since 2013-14.
As of Sept. 15, Saskatchewan Agriculture reports 2 CW oats at $329.70/mt ($5.08/bu), while at least one Manitoba plant is advertising $6.25/bu oats with delivery from October through March.
If food inflation is an issue on your radar, you will want to own your rolled oats for the coming months and soon.
Cliff Jamieson can be reached at email@example.com
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