Canada Markets

Thursday's USDA Dec. 1 grain stocks estimates were viewed as bearish for grains overall, with corn stocks increasing 10% over the December 2015 level, soybean stocks were up 7% and all-wheat stocks were up 19% over the one-year period. One commodity which saw its stocks estimate decline from Dec. 1, 2015 to Dec. 1 2016 was oats, with stocks falling 8.7% to 75.532 million bushels or 1.165 million metric tons.

This is the first time in three years that December oat stocks were estimated lower than the previous year, while the last time that stocks peaked and turned lower was seen in 2008 and 2009 data, which resulted in stocks estimated lower for five consecutive years between 2009 and 2013.

Perhaps one interesting point is the implied 2016 September-December disappearance reported at 3.058 million bushels based on reported stocks, while disappearance totaled 10.981 mb in the same period of 2015 and the three-year average is calculated at 12.865 mb.

The March oat contract gained 10 3/4 cents in Thursday and Friday of this week, while gaining 14 1/2 cents over the week. Friday's high touched resistance at $2.43/bu., a re-test of a former high reached April 16, as well as again on Nov. 18.

Given a move above this level, the continuous active chart shows resistance at $2.49 3/4/bu., which represents the 23.6% retracement of the move from the March 2014 high to the September 2016 low. A move above this level could suggest a further move to $2.81/bu., the 33% retracement of the same downtrend.

Both noncommercial and commercial traders are bullish oats. Weekly CFTC data shows investors or noncommercial traders holding a modest net-long futures position of 89 contracts as of Jan. 10, after holding a modest net-short position over each of the past five weeks. At the same time, the March/May spread has moved from even money to a 5 3/4-cent inverse over the past week, a sign of growing commercial bullishness.

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

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