Old-crop May oats finished modestly higher on Monday for the contract's first higher close in nine days, falling just 1/4 cent short of testing Friday's low while consolidating within Friday's trading range to close 1 1/4 cent higher.
On Friday the USDA reported March 1 or third quarter stocks at 63.2 million bushels, down 15.7% from the previous year although still higher than the five-year average for this period of 59.4 million bushels. This volume points to disappearance in the first three quarters of 153.372 million bushels for 2016/17 given current USDA estimates, only slightly lower than the 154 mb disappearance in the same time period in 2015/16 and higher than the five-year average of 151 mb. Over the past five-years, last quarter usage has averaged 14 mb, which if this level of usage is plugged into current USDA estimates, could result in a higher-than-expected carryout of 49.2 mb, as compared to the current 46 mb estimate released in March. Over the past five years, carryout has averaged 45.3 mb.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT T
The Prospective Planting report estimated 2017 seeded acres at 2.699 million acres, down for the second straight year and the lowest level seen in five years. An average carryout from 2016/17 combined with expectations of increased acres planted in Canada may help limit upside potential in new-crop trade, although the new-crop Dec/March spread has strengthened from a 12 3/4 cent carry to a 7-cent carry in the past two sessions, signaling a less bearish view of new-crop fundamentals held by commercial traders. The December also finished a modest 1 1/4 cent higher on Monday.
The attached old-crop May chart shows commercial activity supporting price above $2.24 1/2/bu., the 50% retracement of the move from the September low to the February high. The third study shows the May/July spread closing at a bullish 3 1/4 cent inverse (May over the July), although this inverse has weakened from 10 3/4 cents since March 22. The histogram on the lower study points to noncommercial traders also adding to their bullish net-long futures position for seven consecutive weeks as of March 28 data to reach 1,287 contracts, which is the largest net-long held since December 2015. Recent weakness is likely tied to noncommercial technical selling.
Cliff Jamieson can be reached at firstname.lastname@example.org
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