Canada Markets

After breaching support of the December oats contract's September low on Oct. 10, the contract closed lower for a fourth session to test further potential areas of support. The December contract settled 13 1/2 cents lower at $3.95 3/4/bushel, dipping below $4/bu for the first time since June 20. This is the largest one-day move lower seen in 14 sessions.

Today's low failed to hold above the 61.8% retracement of the move from the April 28 low to the Aug. 30 high of $5.22 1/2/bu, calculated at $3.98 1/4/bu. Psychological support at $4/bu also failed to support price. Support is also seen from a number of late-June lows on the daily chart ranging from $3.99 1/4/bu to $4.01/bu, while the next potential level of support is seen at the contract's 200-day moving average of $3.94 1/2/bu.

A breach of support could result in an extended move lower to $3.31 1/2/bu, a weekly low reached in May, while the April contract low of $3.21 1/2/bu may also be tested.

The blue histogram bars on the first study shows the bullish noncommercial net-long position falling for a third consecutive week during the week ending Oct. 3, while the 818 contracts net-long position is the smallest reported in seven weeks.

The lower study shows the Dec23/March24 futures spread weakening to minus 20 cents, the weakest or most bearish spread seen during the life of the contract. The five-year average for this date is calculated at a 3.9-cent inverse (December above the March contract), reported as an inverse in three of five years, while ProphetX spreads calculated over more than 40 years fail to show a spread as weak as the current one for this date.

It is likely that the October World Agricultural Supply and Demand Estimates (WASDE) report will prove bearish for the oat market. We do know that the USDA estimated oat stocks as of Sept. 1 at 75.2 million bushels, up 20% from the previous year. The USDA notes that June-through-August disappearance is down 40.3% from the previous year, which bears further investigation.

In addition, the Small Grains 2023 Summary estimates oat production at 57.045 mb (879,781 metric tons), down only 1% from the previous year and up from the 49 mb estimate released by the USDA in September. While the USDA estimated ending stocks for 2023-24 at 31 mb, the lowest in 10 years, it would appear that stocks will be revised higher, while the U.S. reliance on imports may also be trimmed, bearish for the Canadian market.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

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