Canada Markets

Oat prices continue to show no sense of urgency, with the December contract ending 1 cent lower on Tuesday at $2.65 1/2/bu, despite the run in U.S. row crop futures. Tuesday's trading bar represents a doji bar on the candlestick chart, with today's open and close equal at $2.65 1/2, which signals a bearish tone to the market given the finish near the lower-end of today's trading range.

The December contract has recently tested the 38.2% retracement of the move from the October 28 high of $3.26/bu to the April 27 low of $2.38/bu which is found at $2.71 1/2/bu, although has struggled with this resistance for almost a month.

The current short-term trend remains lower on the daily chart, with potential support found at $2.64/bu. The lower study indicates the December/March spread trending weaker since late March, when the spread was reported as narrow as a 2 1/4 cent carry while are reported at a 7 1/4 cent carry today although stabilized in Tuesday's trade (March trading over the December). This is signaling a growing bearish sentiment among commercial traders.

Not shown on the chart, non-commercial traders are gradually paring their net-long position, reported at 266 contracts (futures-only) in the recent CFTC report, the third consecutive weekly reduction and signaling that investors are slowly losing hope of the profit potential in this market.

Seeded acres in the United States are pegged at 2.9 million acres, up 7.6% from 2014, while production is estimated to be the highest since 2010/11. The crop condition as of June 14 pegged the crop at 67% Good to Excellent, a 1% increase from the previous week and 3% higher than the same time last year. The recently released June WASDE report pegged the average farm price in the U.S. for the upcoming year at $2 to $2.60/bu, down from last year's $3.20/bu. Ending stocks in the U.S. are expected to be slightly smaller than last year at 38 million bushels, although this is well below the five-year average of 52.8 mb.

Eyes may remain on the Canadian crop with Statistics Canada poised to release updated seeding projections on June 30. Statistics Canada's March intentions indicated a 30.3% increase in expected oat acres which would see 3.645 million acres seeded and would be the highest area seeded in six years. Some industry sources are suggesting that acres were overstated and will be revised lower in subsequent reports, which may help support this market.

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