Canada Markets

Oats Shine in Today's Trade

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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Cutline: March oats rallied for the fifth time in six sessions on Tuesday, testing the 67% retracement of the move from the November high to January low. Tuesday's move was supported by potential interest from commercial and noncommercial traders, while was achieved on high volume as seen in the lower study. The brown line in the third study points to a bullish inverse of 8 cents on the March/May spread. (DTN graphic by Nick Scalise)

The March oat contract pushed through resistance on Thursday, took a breather on Friday, and then pushed higher in trade in Monday and Tuesday trade. Tuesday's move saw the nearby March contract end 5 cents higher at $2.70/bushel, the day's leader in the U.S. grain markets. This move saw the contract push above the 61.8% retracement of the move from the Nov. 15 high to Jan. 2 low at $2.69 1/2/bu., while failing to hold gains above the 67% retracement at $2.72/bu.

As seen on the third study of the attached chart, the March/May spread has moved into inverted territory, as of Jan. 18, while this inversion has strengthened to 8 cents in Tuesday's trade, with the nearby March closing over the May future. This points to a growing bullish view of fundamentals held by commercial traders and their desire to own oats sooner than later.

The blue bars of the histogram on the fourth study also points to the most recent CFTC data that shows noncommercial traders or investors getting on board. Since reaching a bullish net long futures position of 2,877 contracts on Nov. 28, this group has pared this position in five of the past six weeks. The most recent data, as Jan. 16, shows this group increasing this net-long position to 1,860 contracts, the first increase in three weeks.

With a bullish approach to trade seen on both sides of the market, DTN views this as a potential Type 1 market, the most bullish of the nine market types, with the recommended course of action to remain long cash.

While the most recent AAFC estimate for oat exports is pegged at 2.375 mmt (including oat products), the most recent statistics shows 764,500 metric tons exported as of week 24, or Jan. 14, of grain through licensed elevators, 21% higher than the same period in 2016/17. The most recent Exports of Canadian Grain and Wheat Flour from the Canadian Grain Commission reports an additional 103,533 mt of unlicensed exports shipped as of November.

Indications for 2 CW oats in Manitoba range from $2.90 to $3.10/bushel.

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

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