The bad news is that the Europeans came into the oat market and knocked it down a dime per bushel.
The good news is that the usual wave of post harvest Canadian oat deliveries won’t push prices lower, said Randy Strychar of Ag Commodity Research.
“I don’t think we’re going to see it,” Stychar said about harvest pressure on prices. “This is not doom and gloom at all.”
Prices on the Chicago Board of Trade’s oat contract quickly fell by five cents per bu. last week when the European Union announced it was going to subsidize oat exports. European hedgers quickly entered the market and sold futures, pressuring prices.
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By the end of the week, futures contracts had dipped eight to 10 cents per bu. Strychar said oat futures trading this autumn has been slow, often less than 1,000 contracts traded per day, and the sudden surge hurt the market.
“When you go from 500 a day to 3,500 the next day, it’s not a surprise you’re down a nickel,” he said.
The surge of European selling followed the EU’s announcement that it would subsidize the export of 84,000 tonnes of oats.
The subsidy rate is not high, Strychar said, and the amount subsidized is much less than in recent low-price years.
Strychar said the potential for further Scandinavian oat subsidies to disrupt the market is limited because Finland had a poor crop this year. A maximum of 400,000 tonnes is likely for this crop year.
What is remarkable is that such a small amount of Canadian crop is being hedged this fall.
That is probably a result of much of the crop still lying in the field.
Strychar said oat prices have fallen below a level many farmers can accept, so after selling some crop to pay bills, they will likely store their oats until better prices return.
That reluctance to sell has kept prices higher than some expected, considering the relatively large oat crop.
The market was expecting a bigger and better crop than was harvested.
“If we had had a normal harvest, we had gotten the crop we thought we were going to get, we would probably have pushed this board down ourselves with Canadian hedging,” said Strychar. “Canadian hedging has not pressured the market.”
