Canada Markets

December Oats Return to August Highs

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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December oats have returned to a near-test of the high reached on Aug. 9, ending higher for the sixth consecutive day on Tuesday. The first study shows the Dec/March spread moving into a bulling inverse this week, ending at 4 cents on Wednesday. The lower study shows latest CFTC data with investors holding a modest bullish position. (DTN ProphetX chart)

December oat futures are on a tear, with Wednesday's session closing higher for the sixth straight session to a near test of the Aug. 9 high of $2.78 3/4/bu. Wednesday's move saw the December contract end 2 cents higher at $2.75/bushel, after reaching a high of $2.78/bu. Wednesday's close marks a 16.6% recovery since the September 17 low was reached.

The first study shows the December/March futures spread, which has moved into a bullish inverse (December trading over the March contract) on Oct. 1, strengthening 4 3/4 cents this week to an inverse of 4 cents/bushel. This is a sign of front-end bullishness on the part of commercial traders.

The histogram in the lower-study points to a modest net-long futures position held by noncommercial traders as of Sept. 25 CFTC data, signaling a bullish view of fundamentals on the part of both commercial and noncommercial traders, which signifies the most bullish of the market types.

The recent Small Grains 2018 Summary released by the USDA shows estimated production of U.S. oats at 56.1 million bushels. While this volume is up 14% from last year, it is 15% or close to 10 mt below the estimated production used by the USDA in September.

Meanwhile, Canada's harvest remains stalled in many areas, and quality may be suffering overall. While Manitoba's oat harvest was estimated as being 95% complete as of Oct. 1, Saskatchewan's harvest was estimated at 49% complete and Alberta's oat harvest was estimated at 13.4% complete as of last week, with limited progress since. The latest Statistics Canada production estimates point to a crop size that is forecast down 9% from 2017, while approximately 43% of this production is facing harvest delays linked to adverse weather.

Total open interest for oat futures was reported at 4,314 contracts as of Oct. 2, down 26.3% from the same date in 2017 while down 52.5% from the five-year average.

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

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