Canada Markets

December Oats Break Support

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The December oats daily chart shows Wednesday's close at $2.43 1/4 per bushel and below retracement support at $2.44 1/4 per bu. Prices are in over-sold territory (second study), although this hasn't slowed noncommercial liquidation. The third study shows supportive commercial buying this session, given strengthening futures spreads, while the histogram in the lower study shows noncommercial traders still holding a bullish net-long futures position of 1,573 contracts. (DTN graphic by Nick Scalise)

The December oat chart and the December spring wheat chart share simulates in that both charts reached a peak during the week of July 3 and have since trended lower. While spring wheat has recently stabilized above the 67% retracement of the move from the contract's April low to July high, the oats market closed below this same level of support after testing it in three of the past six sessions.

December oats finished 3 1/4 cents lower at $2.43 1/4 per bushel, below the $2.44 1/4 per bushel support level, which could lead to even further technical selling. While the stochastic momentum indicators on the daily chart are shown in oversold territory, the weekly chart (not shown) shows these indicators drifting lower while in neutral territory. This suggests that a further move lower on the weekly chart is possible prior to reaching oversold territory.

As of Aug. 1, CFTC data showed noncommercial traders or investors holding a net-long futures position at 2,295 contracts, the largest net-long position seen since November 2014. This position has been pared by 31.5% since that time to 1,573 contracts, which is the lowest in 10 weeks, but remains high relative to what has been seen over the past two crop years.

The weakening Canadian dollar may buffer some of the impact to oat prices in Canada, although prices have faced pressure. Manitoba Agriculture reported 2 CW oats delivered Winnipeg at $3.13/bu., as of June 30, very close to the high reached in the futures market, while its most recent report shows price at $2.84/bu. as of Aug. 25. Elevator bids in Manitoba seem closer to the $2.70 level on Wednesday as harvest advances.

Statistics Canada will release two key reports in the coming days. On Thursday, the season's first production estimates will be released. A Commodity News Service report on DTN shows the pre-report estimates for Canadian production ranging from 3.1 million metric tons to 3.6 mmt, which compares to the 3.147 mmt produced in 2016 and the five-year average of 3.258 mmt. At the same time, producer surveys for this report were conducted at a time when the drought on the Prairies was at its worst, while early harvest yields reported in Manitoba are above average. This week's crop report from that province shows early harvest results for oats ranging from 100 to 180 bushes per acre, which compares to the five-year average of 93.7 bpa in the province.

On Sept. 6, Statistics Canada will follow with the July 31 stocks report. One trade survey conducted by a media source points to an average estimate of July 31 stocks at 700,000 metric tons, just slightly lower than the five-year average of 784,000 mt.

The latest USDA WASDE report shows United States oat imports forecast at 100 million bushels (1.5 mmt), up 10.7% from 2016/17, just slightly higher than the five-year average of 94.9 mb (1.46 mmt).

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

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