December oat futures have seen buying interest lately as prices have rebounded 15 1/2 cents or 5% since reaching a contract low of $3.03 per bushel on Sept. 18. The move has led to a break-out of the short-term downtrend which started Aug. 27 at $3.56/bu.
Thursday's close, at $3.18 1/2/bu., tested the contract's 20-day moving average at the same level, which will remain as resistance in upcoming sessions. Should this price be breached, watch for a move to the $3.23 1/4/bu. level, which is a 38.2% retracement of the downtrend from Aug. 27 to Sept. 18.
The second study indicates momentum indicators on the daily chart moving sharply higher, after a bullish cross-over of indicators while in over-sold territory (below 20). Although not shown, the weekly chart has also shown this same bullish move in recent days, although the indicators remain oversold and it may be too early to determine whether this momentum will last.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT T
One indication of growing fundamental bullishness is the increasing inverse (nearby future trading higher than the distant future) as seen in the third study. Thursday's close saw a bullish Dec/Mar spread of plus 5 3/4 cents (Dec trading over the March). This is a sign of growing commercial bullishness. Further out, the Mar/May spread (not shown) closed at minus 3/4 cents (May above the March) which is also trending higher on the chart and may soon invert as well.
Also of interest is the fact that the noncommercial position (not shown) for oat contracts has declined in recent weeks. The noncommercial net-long position hit a recent high of 1,923 contracts on Sept. 6, as reported by the Commodity Futures Trading Commission, and has since declined to a net-long of 1,005 contracts as of Sept. 20. Commercial buying, as shown by the recent inverse, has set market direction despite non-commercial (investor) liquidation.
Most recent supply and demand tables reported by Agriculture and Agri-Food Canada suggest a very tight carryout of 400,000 mt for 2013/14. A 400,000 mt carryout would be the tightest since July 2002, when the carryout reached 363,000 mt. These tables are perhaps suspect given that the July 31 stocks announced in Statistics Canada's Sept. 6 release of Stocks of Principal Field Crops, reported at 511,000 mt, is not incorporated into the supply and demand tables as would normally be the case. Another reason to doubt AAFC's S & D tables is due to the fact that yields across the Prairies should significantly exceed the yields reported by Statistics Canada in its July Estimates report, simply due to yield improvements since the producer yield surveys were conducted.
Monday, September 30 will see the USDA release the Small Grains Annual Summary, which will shed light on the status of the U.S. crop. Recent commercial interest in the futures market may suggest that a bullish data release may be just around the corner.
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Cliff Jamieson can be reached at email@example.com
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