Glacier FarmMedia COVID-19 & the Farm

Relative oats strength running into resistance

(Doug Wilson photo courtesy ARS/USDA)

CNS Canada –– Oats bids in Western Canada are holding steady for the time being, but could be due for a setback given the weak U.S. corn market and declining nearby demand.

“My bias is towards oats prices going down in relation to other commodities,” said Ryan McKnight of Linear Grain at Carman, Man.

Demand from the horse sector was backing away, he said, with corn and other grains cheaper to feed than oats. Demand from U.S. millers was also slowing down, as oat stocks in Minneapolis and Duluth are building.

Funds are also holding large long positions in the CBOT futures and oats could see a big move if they start to liquidate, “but it’s hard to predict when, or if, that will happen,” said McKnight.

Over the past winter, logistics issues moving Canadian oats to the U.S. caused prices to rise. While the transportation situation is still not perfect, the oats are generally getting where they need to go for the time being.

Jarrod Firlotte of Emerson Milling, near Emerson, Man. just north of the U.S. border, said his company was still buying spot oats, but was comfortable with contracted supplies through February.

There were some quality issues with this year’s smaller crop, he said, but those had only been a small portion of the samples submitted.

CBOT December corn settled at US$3.4825 per bushel on Monday, while December oats were two cents above that at US$3.505 per bushel.

The strength of oats relative to corn is not a historically sustainable spread, as oats typically trade at a discount of as much as $2 relative to corn. Cash bids in Western Canada are currently topping out at as much as C$3.40 per bushel in Manitoba, according to Prairie Ag Hotwire data.

“With $3 corn, how high can oats go?” Firlotte asked.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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