Canada Markets

Statistics Canada Oat Planting Intentions Weighs on Market

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
Connect with Cliff:
December oats have fallen for the third consecutive day, although finished closer to session highs on Monday. New-crop spreads have stabilized (second study), while momentum indicators in the third study shows a potential shift to upward momentum on the daily chart. Monday's move took place at high volume, which may signal a bottoming action. (DTN graphic by Nick Scalise)

New-crop oat futures have not taken kindly to last Thursday's Statistics Canada report given the estimated 30.3% increase in oat acres projected in Canada for the 2015/16 marketing year. The estimated 3.645 million acres was above pre-report trade estimates which called for acres to be reported in the 2.7 million to 3.4 million acre range.

Oat acres are estimated to rise to 3.645 million acres from last year's 2.798 ma, while the five-year average according to Statistics Canada data is 3.017 ma. The largest jumps are expected in Manitoba and Saskatchewan, with Manitoba expected to increase seeded acres by 110,000 acres, or 29%, to 490,000 acres, while Saskatchewan is expected to increase acres by 640,000 acres, or 47%, to 2 million acres. Alberta is expected to see acres increase 15,000 acres, or 2%, to 685,000 acres. The 3.645 million acres could be the largest acres planted since 2009.

Projections for 2015 production utilizing historical yield and area harvested data would suggest supplies will be large in Canada in the 2015/16 crop year. At 98% harvested and using the five-year average yield of 80 bushels per acre, total production could reach a level of 4.41 million metric tons, well above last year's 2.908 mmt and 45% above the five-year average of 3.047 mmt. This would be the highest level of production seen since the 2007 estimate of 4.6 mmt and the second highest since 1976.

P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]

Total supplies for the 2015/16 crop year, utilizing existing Agriculture and Agri-Food estimates of a 725,000 mt carryout from 2014/15 and 13,000 metric tons of imports next crop year would total 5.15 mmt, up 16% from 2014/15 and well above the 4.014 mmt five-year average. This would represent the largest supplies seen since the 2008/09 crop year. Given current AAFC demand estimates, ending stocks could push towards extremely bearish levels.

Since the report, the December future has shown bearish action, although the move lower is attempting to stabilize, suggesting the move may be close to ending. The December contract lost 6 cents the day of the report, an additional 9 cents on Friday and plummeted a further 21 1/4 cents lower in Monday's activity before uncovering buying interest, only to see losses pared to 4 cents, for a total loss of 19 cents, or 7%, in the value of the contract over three days.

Will these acres actually be planted? Given the move in the market, producer returns in the largest producing province of Saskatchewan may struggle to reach breakeven levels, which may result in a less eager response in oat planting when producers do get to the field. Another factor that may temper producers' plans is the recent announcement by a Canadian oat miller who is refusing to accept new-crop oats sprayed with glyphosate, widely used to speed maturity in order to protect grades and meet milling quality.

One other factor pointed out in previous blogs indicates that oat acres have historically been overstated in the March Intentions report. Over the past five years, oat acres have been overstated each year in the early report with final seeded acres being 15.7% lower than March intentions on average.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

(ES)

P[] D[728x170] M[320x75] OOP[F] ADUNIT[] T[]
P[L2] D[728x90] M[320x50] OOP[F] ADUNIT[] T[]

Comments

To comment, please Log In or Join our Community .