By Julie Ingwersen
CHICAGO, Feb 26 (Reuters) – Oat futures on the Chicago Board of Trade notched a record high for a second straight day on Wednesday, driven by razor-thin U.S. supplies as rail shipments of the feed grain from top supplier Canada remain snarled.
Canada is the world’s top exporter of oats, but rail cars there have been backlogged since last autumn, stalled by record-large Canadian grain harvests coupled with brutal winter weather. The delays are expected to persist into April.
“It’s all logistics. Some of these outfits have had cars ordered since November and have not gotten a car,” said Rick Rose, owner of JM Rose Grain & Feed in Chicago.
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The United States is the world’s biggest oats buyer, forecast by the U.S. Agriculture Department to import 1.6 million tonnes in 2013/14.
CBOT oat futures closed off their highs, with the spot March contract up 3-3/4 cents at $5.06-3/4 per bushel after soaring to $5.33, surpassing the previous record of $5.03 set Tuesday. Oats rose their daily trading limit, which was expanded to 30 cents on Wednesday after nearby contracts closed up the 20-cent limit the day before.
Transportation problems in Canada “have created a nearby supply tightness for the U.S. oat market, which isn’t very big or very liquid. And that has allowed prices to accelerate to the upside,” said Sterling Smith, futures specialist with Citigroup in Chicago.
He noted that most-active May oats ended down 7-1/2 cents Wednesday at $4.60-3/4, after posting a life-of-contract high at $4.98.
“It appears today that the small speculative bubble that had formed met its maker at $5 a bushel, basis the May contract. We pushed up to $4.98 and buying dried up quickly,” Smith said.
Oat futures are lightly traded compared with corn or soybeans, making the market more vulnerable to big price swings, traders said. Daily trading volume in oats over the past week averaged 1,400 contracts, compared with CBOT corn at more than 400,000 contracts.
Open interest in oats totaled 10,582 contracts ahead of Wednesday’s trade, dwarfed by the 1.3 million contracts open in CBOT corn.
CBOT March contracts on Friday enter their delivery period, during which the futures market acts like a cash market. Traders holding long futures positions can force the “shorts” to deliver the physical commodity. Given the tight supply of oats, the looming deadline may have prompted shorts to pay up to exit their positions, rather than risk having to deliver.
With wintry conditions forecast to persist in Canada, buyers in the United States have already begun to seek oats from Europe. Some shipments have already arrived from Sweden or Finland, Rose said.
“I think they’ll bring in more but I don’t think they will arrive until later in the spring,” he said.
