Oats futures prices plunged
Oct. 11, but market analysts say cash markets are likely to stay strong
as long as farmers are miserly with oat sales.
“There’s no reason for a wholesale price collapse here that we can
see,” said market analyst Randy Strychar of Statcom Ltd.
“Unless farmers start to sell, the millers won’t be able to chase down
prices that easily.”
The one day price plunge of 15 cents US per bushel on the Chicago Board
Read Also
Bond market seen as crop price threat
A grain market analyst believes the bond market is about to collapse and that could drive down commodity values.
of Trade was not caused by the United States Department of
Agriculture’s October supply-demand report, released the same day,
Strychar said. It did not include oats and there were only small
revisions to corn production and stocks.
The slump was caused by low trade volume, high open interest, long
liquidation and trailing stops. Simply put, many speculators had bought
lower priced oats contracts, watched them rise in value, then sold some
to take a profit. There were more sellers than buyers on Oct. 11.
Prices started to fall and as they hit stop-loss orders, it triggered
automatic selling that pushed the price even lower.
“This is typical of a thinly traded commodity,” said Strychar.
He was watching to see if millers would begin lowering their oats bids
following the futures slump, and for evidence of farmer panic selling
He doubts farmers will panic. So far, they have shown they will hang on
until they get better prices.
By this time last crop year, farmers had sold 535,000 tonnes of oats,
but this year they have sold only 389,000 tonnes.
Ken Ball of Benson Quinn GMS also doubts farmers will panic.
“The fundamentals on oats are still constructive. I’d be surprised if
oats stayed down.”
But he feared this sudden slip may reveal that the oats market has
peaked below the level it reached last year.
He wondered why commercial buyers didn’t buy as the price fell Oct. 11.
Strychar thinks commercial buyers still need oats but want the price to
drop more before buying large quantities.
