Fundamentally Speaking

We do not often talk about oats but in the past it has been seen as a market leader and is one of the earliest crops to be planted.

It was a year ago when July 2023 oats topped out at over $6.25 per bushel but earlier this month, they had lost more than half their value, falling right to the $3.00 level before seeing a slight rebound.

Last week the USDA released its first national oats condition report for the 2023 season and using our usual ratings system we weight the crop based on the percent in each category and assign that category a factor of 2 for very poor, 4 for poor, 6 for fair, 8 for good, and 10 for excellent and then sum the results.

This graph plots the first oat crop rating of each year from 1996 to 2023 along with the rating seen the last week of July when the crop is well advanced and close to being harvested on the left-hand axis.

On the right-hand axis is the percent that the final oat yield of each season deviated from the 25-year trend.

This year's initial oat rating is 688 and though that is below the 1996-2022 average of 719, it is the highest initial oat rating in three years and well above the year ago 618 which was the worst ever.

Given that the bulk of oats are grown in the Upper Midwest and Northern Plains, the past few seasons in that part of the country have featured cold and wet springs and a severe drought two years ago.

Texas, another large oat growing state, has been suffering from very dry or even drought conditions for the past three years.

This is the primary reason why U.S. oat yields have been below trend every year since 2016.

There is a long way to go as the correlation between the first oat rating and the percent that final yields deviate from trend is only 25% but that improves to 52% when using end of July crop ratings.

One of the reasons we were interested in the first oat rating of the year is what it may imply for corn when its first condition report is released this week, but the correlation here is a rather low 18%.

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