Canada Markets

The oats market has long held the reputation of entering into trends in advance of other grains, thus the saying "oats know." That being said, the December oats market has moved against the grain this week, gaining 8 cents on July 1, 10 cents on July 2 and an additional 3 3/4 cents in Thursday's trade, the final day of trade this week in the United States due to the July 4 holiday.

In the process, the move broke trend-line resistance at $3.32/bu, a line which has largely confined trade since the high of $3.61 3/4/bu was reached on Feb. 26.

So who or what is behind this move? The most recent CFTC data suggests that noncommercial traders, or investors, have been increasing their net-long position over the past four weeks, from a net-long of 732 contracts reported on the week ending May 27 to a net-long of 2,354 contracts for the week ending June 24.

In addition to investor interest, the spread chart indicates a sharp move higher in the Dec/March spread, from plus 2 1/2 cents on June 30 (December over the March) to plus 11 3/4 cents this session. Commercial traders have also turned much more bullish.

On Monday of this week, USDA reported that oat acres in the U.S. would be 3.027 million acres, just slightly higher than last year and also just slightly higher than the five-year average of 2.96 ma. Also released this week was the U.S. crop condition as of June 29, which indicating that 64% of the crop was in good-to-excellent condition.

Perhaps a more significant issue concerning markets is the recent deluge of moisture in eastern Saskatchewan and Manitoba. Recent data from Statistics Canada suggests that 3.0463 million acres were seeded this spring, down 3.8% from last year and below the five-year average of 3.2 ma. Of this total, close to 2 ma or 65% was reported to have been planted in Saskatchewan and Manitoba.

To get a feel for how the crop is responding to the recent adverse weather, Saskatchewan Agriculture's weekly crop report reported that 61% of the spring cereals were behind normal developmental stages, while the oat crop was rated at 63% good to excellent, down from 72% last week and 81% this time last year. Given that it may take some time before we know just how many acres were actually seeded on the Canadian prairies this spring due to the June rainfall and that it will also take some time before we know the extent of the damage to the growing crop from the excess moisture, markets may continue to show growing nervousness. Also, if oats really knows, this concern may spread to other markets over time.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

(ES/)

© Copyright 2014 DTN/The Progressive Farmer. All rights reserved.