The December oat contract on the Chicago Board of Trade closed at $2.40 per bushel Oct. 9, reaching its highest level since early July.
The mini-rally began in early September, when the December futures contract was trading slightly more than $2 per bu.
Market watchers believe the rally is partly explained by corn futures, which have also climbed since early September. However, it is also connected to the late harvest and recent rain in Saskatchewan.
“We’ve got the oat harvest around, I think the last that Sask Ag came out with, was 58 percent (complete), so the numbers are quite low compared with what they should be, around 68 to 69 percent at this time of the year,” said Randy Strychar, president of Ag Commodity Research in Vancouver.
Read Also
Red lentils priced higher than large greens
Red lentil prices have eclipsed large green lentil prices for the first time since 2014.
Strychar said the market is also responding to worries about oat quality.
“What we’re concerned about is sprouting, staining and mildew …. Some of the shipments that are coming out of Canada to the U.S., we’re getting reports of staining and sprouting right now,” Strychar said.
The December oat contract has been stuck in the $2 to $2.20 range since the middle of July as huge stockpiles weighed on the market.
As of July 31, Agriculture Canada estimated oat stockpiles at a record 1.5 million tonnes, well above the five-year average of 830,000 tonnes.
However, Agriculture Canada’s production estimates, released earlier this month, may have given the oat market a boost. The department predicted that Canadian farmers would produce 2.9 million tonnes this year, down from 4.27 million tonnes in 2008.
The substantial loss in production can be explained by farmers such as Dwayne Anderson, of Fosston, Sask., who grew other crops this year.
“We were way down on our oat acres this year,” said Anderson, who had 250 acres of swathed oats to harvest before the Thanksgiving weekend.
“It was price. We went after the malt barley (prices) instead of oats and then a bunch of cash crop stuff…. Not everybody reduced it like I did, but there doesn’t seem to be as many oat acres in the country.”
In its June estimates, Agriculture Canada predicted 3.8 million seeded acres of oats, significantly down from the five-year average of 4.8 million.
Agriculture Canada expects carry-out stocks to fall to 1.1 million tonnes this year, but that may not be enough to boost prices.
Nonetheless, if oat prices don’t rebound substantially by next spring, Anderson believes acreage on the Prairies could decline further.
“The marketplace is going to have to price aggressively at some point to make sure that the acres don’t fall again next year.”
With lower stocks this year and the possibility of fewer acres next spring, Strychar believes the oat market is likely to turn around.
“I think we’re getting to a transition from a bear market to certainly, at the very least, a neutral market, and probably somewhat of a bullish market somewhere, my guess, between February and June or July of next year.”
However, Ken Ball, a broker with Union Securities in Winnipeg, is not convinced that oat prices will bounce back.
“The chart looks like it’s formed a little base and this rally has a little potential, but it may be a tough haul for oats …. The situation doesn’t seem to support a lot of action here.”
Although the harvest is late, Ball said harvested fields are producing high oat yields, which could skew the balance between supply and demand.
“Yields in Saskatchewan were extraordinary in many areas …. I’ve got customers that were pulling 150 to 180 bu. (per acre) oats in northern Saskatchewan, and that’s not typically an area that yields that high,” he said.
“If you take the last production number and plug it in a supply-demand table, it’s obvious that oat supplies are going to tighten up a fair bit …. But if you add on another 300,000 or 400,000 tonnes of production, all of a sudden we’re left with a fairly comfortable carry-out again.”
Regardless of stockpile numbers and price, Anderson’s focus is getting his crop in the bin. Before the Thanksgiving weekend, snow and 90 millimetres of rain fell on his land, pushing back an already late harvest.
However, he remains hopeful that he’ll get the crop off, provided there is a stretch of warm and windy weather later in October.
