Oat prices in Western Canada lost about 30 to 35 cents per bushel throughout the week ended Dec. 21, following along with outside grain futures markets.
"Oats tend to be a bit of a corn follower, and corn exports are just way down," said Ryan McKnight, a grain merchant with Linear Grain at Carman, Man.
Long liquidation by fund accounts ahead of the holiday season was responsible for much of the weakness seen in the futures market, which spilled over to weigh on cash prices as well.
McKnight said prices are generally weak around this time of year and start to pick up again in the New Year.
As of Thursday, prices of oats delivered to elevators across Western Canada ranged from $2.78 to $3.70 per bushel, according to Prairie Ag Hotwire.
Before the prices dropped, some farmers in Manitoba and southern Saskatchewan were seeing values as high as $4 a bushel, and $3.50 in northern Saskatchewan, McKnight noted.
Many farmers took advantage of those prices and sold a lot of their oats, but will hold off on selling again until prices reach those levels again.
In the long term, prices don’t have a lot of potential to move higher because of macroeconomic problems such as "fiscal cliff" issues in the U.S., the euro zone debt crisis and slow growth in Asia, McKnight said.
If prices don’t move higher, farmers in Western Canada will probably wait until July 2013 before deciding what to do with the oats that they have in the bin.
"If prices don’t meet farmers’ expectations, they just keep storing it and in July they decide what they’re going to do," said McKnight. "If they’ve got a good crop coming then they’ll just get rid of them right before harvest."
The only way prices could see a bounce is if farmers run into production problems because of weather, insects or disease.
McKnight said oats are generally underpriced compared to other crops, so he expects oat acres in Canada will be down in 2013.
"If people need to grow cereal grain, they’re going to look at planting wheat, because wheat seems to be a way better pricing option than oats are at the moment," he said.
In 2012, farmers across Canada planted 2.85 million acres of oats, down from 3.24 million in 2011, according to Statistics Canada’s Dec. 5 crop production report.
– Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.