A good time to sell oats
If you’ve got oats in the bin, it’s probably time to sell them.
Prices have edged up recently and last week topped $112 a tonne basis Saskatoon, freight deducted.
One analyst says these strong prices won’t last.
Randy Strychar, who publishes Statcom, an oats newsletter out of Vancouver, says the recent runup in prices is due to short covering by the line elevator companies. In other words, this is not new demand but sales that grain companies already have on the books but don’t have the product to fulfil them.
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In fact, we are looking at the largest oats ending stocks in about 17 years, he said.
Expectations were that Canada would export a record 1.4 million tonnes of oats, but Strychar fears transportation delays and rail car shortages will make that goal hard to attain.
So far, about one million tonnes have been shipped or booked.
Subsidies hinder sales
Scandinavian countries had a good oats crop in 1996 and have sold more than 400,000 tonnes with the help of subsidies to the U.S., squeezing the opportunity for more Canadian sales.
So Strychar says unless there is an unexpected run in corn prices that pulls up all feed grains, today’s oats prices are probably the high for the rest of the marketing year.
As for 1997-98, he sees potential for another year of strong international competition.
U.S. analysts expect their trend of dropping oats acreage to continue, particularly if there is a late spring.
But Strychar notes with set asides dropping in the European Union, Scandinavian countries are expected to seed the same area to the crop as last year. Acreage in Canada could drop about 15 percent, but given large carry-in stocks, there might be lots of oats around next year.
Strychar suggests producers might want to lock in a price for about 20 percent of their expected 1997-98 production.
Growers Marketing Services also recommends producers sell into this rally and price some new crop. Analyst Charlie Pearson said basis levels are attractive now and in some cases there is a premium over the futures contract.
However, Pearson is a little more optimistic about next year. A producer could look at forecasted acreage drops in Canada and the U.S. and become quite bullish.
But he warned that oats are mainly a feed grain and can’t get far out of line with other ingredients in rations.
