Canada Markets

December Oats Finish at a 13-Week High

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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December oats challenged resistance near 13-week highs this week, to close near the upper end of the range traded since mid-August and at the highest weekly close in that 13-week period. The lower study shows the Dec/Mar spread ending at a 6 3/4 cent inverse, with nearby commercial demand supporting prices. (DTN graphic by Nick Scalise)

For the first time in eight weeks, the December oat contract tested resistance and failed, although it did close in the upper-end of the range traded over the past 13 weeks and also ended the week at a 13-week high. Over this 13-week period, the contract has traded between a low of $2.10 and a high of $2.41 per bushel. Thursday's high of $2.39/bu tested resistance of 1) the 38.2% retracement of the move from the contract's June high to October low at $2.38/bu 2) the contract's 100-day moving average at $2.37 1/2/bu and 3) the 13-week high of $2.41/bu.

Friday's trade saw the December contract end 1 1/2 cents higher at $2.31 1/2/bu within striking distance of resistance, with today's support coming from a combination of the contract's 20-day moving average at $2.27/bu and the contract's 50-day moving average of $2.27 1/4/bu while the close was higher despite the rally in the U.S. dollar.

Of interest is the lower study of the attached chart, showing the Dec/March spread (black line) moving into inverted territory on Tuesday of this week, while ending the week at a 6 3/4 cent inverse (December trading over the March). This is a sign of firm commercial demand in the near future.

A look back in time shows this same spread trading at a carry in four of five years on this date in the five-year period from 2010/11 to 2014/15. The average carry was 2.6 cents over this five-year period, which includes the 2013/14 crop year when the Nov. 13 spread was reported at a 17.5 cent inverse, a period of time when Canada's transportation crisis affected north-south movement and choked the movement of product.

The most recent AAFC supply and demand estimates have pegged 2015/16 oat exports at 2.125 mmt, down 4.6% from the previous crop year. Week 14 statistics shows year-to-date exports from licensed facilities at 324,200 mt, close to 2% ahead of the same week last year. Unlicensed exports play a significant role in meeting this total, with roughly 597,000 mt exported through unlicensed channels in 2014/15. Unlicensed exports reported for August are reported at 33,142 mt, below the volume shipped in August 2014.

Accessible on-line cash bids in Manitoba show prices nearing the $3/bu level.

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