All oat data was left unchanged from the December estimates in Tuesday's USDA report, although the average farm price range was narrowed slightly to $2.10 to $2.30/bu USD. One piece of data released was the December 1 stocks data, which marks the first half of the 2015/16 U.S. crop year.
Oat stocks in all positions were reported at 82.885 million bushels, up 23.7% from December 1 2014 to reach a five-year high. At the same time, the nearby March contract hit a low of $1.92 1/2/bu prior to the release of the report, the lowest level reached since June 2010, only to rally with other grains after the release of the report.
The market itself is suggesting that there is nothing bearish about this level of stocks. As indicated on the attached graphic, Dec. 1 stocks as a percentage of total estimated supplies is calculated at 34.8%, having increased over the past two years, but only a three-year high and historically low as indicated in data going back to 1980/81.
Futures spreads are indicating an increasingly bullish view of market fundamentals as determined by the activity of commercial traders. The March/May spread closed at a bullish inverse of 1 1/2 cents (March trading over the May) while the May/July spread is trading at a weak carry of 3 3/4 cents, both having narrowed in recent days.
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Also of interest is the latest CFTC data. Noncommercial traders or investors held a bullish net-long futures position of 1,077 contracts as of Jan. 5, with this net-long position falling over the past two weeks. Note that these speculators are holding a position which is the opposite of that seen in the wheat, corn and soybean markets. What is more intriguing is that commercial traders, those showing bullish signs considering the inverted nearby spread, held a bearish net-short futures position as of Jan. 5, having pared this position for two consecutive weeks. Further commercial buying is bound to place a solid floor under this market.
While current USDA estimates suggest that U.S. imports of oats will fall by 11.2% to 95 million bushels in 2015/16, or close to 1.5 million metric tons, Canadian Grain Commission statistics as of Jan. 3 or to the end of week 22 show licensed exports to be just 3.7% below year-ago volumes, indicating that more product could flow south than budgeted for by the USDA despite the highest estimated supplies estimated in the U.S. in five years.
March oats posted a modest 1/2-cent loss on Wednesday to end at $2.05/bu, with a move above retracement resistance at $2.13 1/2/bu needed to signal a move into an uptrend.
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