Canada Markets

New-Crop Oats Stuck in Sideways Trade

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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New-crop December oats continue to consolidate on the weekly chart while holding above the 50% retracement of the move from the March low to the April high at $2.18 1/2/bu. The histograms in the lower studies represent the net-futures positions for noncommercial traders (green bars) and commercial traders (blue bars), with the latest data showing both sides of the market are holding bearish net-short positions. (DTN graphic by Nick Scalise)

Early government reports from both sides of the border suggest that producers will seed approximately 11% fewer acres to oats in 2016, although this has had little impact on the new-crop market which continues to struggle in a sideways direction.

Statistics Canada has reported that producers will plant 2.972 million acres in 2016, 11% lower than last year while just slightly below the five-year average of 3.093 ma. Current AAFC supply and demand tables indicate a 2015/16 carryout of 850,000 metric tons at the end of July, a 25% increase over the previous crop year while above the 744,000 mt five-year average carryout.

As well, the March 31 Prospective Plantings report in the United States shows that country's growers planting 2.751 ma, also down 11% from 2015 while also just slightly lower than the 2.774 ma five-year average. U.S. ending stocks are estimated at 65 million bushels (1 million metric tons) in the USDA's April supply and demand report as of the end of May, which is up 20% from last year, the highest since 2010/11 and well-above the 48 mb five-year average. Ending U.S. stocks as a percentage of annual use is estimated at 37.7%, the highest stocks/use ratio seen since 2009/10.

Another bearish factor in the oat market is the early start to the season, as seen in Monday's weekly Crop Progress report. The nine-state planting progress indicates that 78% of the crop is planted as of May 1, down 3% from last year's progress but 13% above the five-year average for this week. As well, 56% is estimated to be emerged, well-ahead of the 47% five-year average.

A look at the December weekly chart attached shows a sideways trade going into the second week, as indicated by the horizontal move in the weekly stochastic momentum indicators (second study).

The latest CFTC data, as of April 26, was not viewed as friendly for oats, with both commercial and non-commercial traders holding a bearish net-short futures position in oats. The fourth study shows noncommercial traders holding a net-short position of 193 contracts (green bars), the 11th consecutive week of holding a net-short position.

As well, the histogram in the lower study (blue bars) also points to a bearish net-short held by commercial traders for the second consecutive week, moving from a net-short of 29 contracts, to 562 contracts, in the latest week. The middle-study also represents the growing bearish sentiment held by commercial traders. The purple line is the continuous spread between the two nearby contracts, which ended with a weak carry of 13 1/4 cents in the May/July this session, 1 cent weaker than Friday's close. Nearby support on the spread chart is seen at minus 13 3/4 cents reached in July 2015, which is the weakest spread seen since December 2012.

The Dec/March spread finished with a weak carry of 9 3/4 cents, although narrowed 1/4 cent from last week's close at minus 10 cents, (March above the December).

Upcoming data releases this week include Statistics Canada's March 31 stocks report, to be released on Friday May 6 at 7:30 CDT.

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This week's question asks how you think that actual planted acres in Canada in 2016 will vary from the March intentions released by Statistics Canada. You can weigh in with your thoughts on DTN's weekly poll, found at the lower-right side of your DTN Home Page. We appreciate your feedback!

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

Follow Cliff Jamieson on Twitter @CliffJamieson

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