Oats aren’t corn or soybeans.
Just because corn and soybean prices look like they have nowhere to go but up, you shouldn’t assume the same with oats, say some market watchers.
In fact, oats are likely to go down if prairie farmers get average yields this summer, they say.
“If acreage is down five percent, but farmers get normal yields, you get a lot of oats,” said Randy Strychar, oats market analyst for Ag Commodity Research. “This rally has not been led by cash buying.”
Read Also
Canola used in only quarter of Canadian biofuel
Less than one-quarter of the biodiesel and renewable diesel used in Canada in 2024 was made from canola oil feedstock
Oat prices have risen strongly on the Chicago Board of Trade’s new-crop futures contracts, to $1.90 US per bushel from $1.55 since the start of February.
But Strychar said oats are merely being dragged along in the slipstream of the soybean rally, which is pulling the whole market up with it. A lot of recent bullish buying has been done by commodity funds, not commodity users.
But while soybeans and corn stocks will likely be low after the next harvest, there is no reason to expect oat stocks to be short.
Farmers appear to be planning to seed more than they did last year.
“Around here I expect a small increase in acres, like five percent,” said Terry Tyson of Popowich Milling in Yorkton, Sask.
Any increase in acreage with typical yields will sharply knock new-crop oat prices, Strychar said.
Tyson said farmers know that today’s new-crop oat prices are good by historical standards – anything over $2 Cdn per bu. is.
But many are hoping this rally will continue and help them recover from two years of drought-reduced crops.
“We’re not putting a whole lot on the books right now,” said Tyson. “But I hear guys talking about it. When the market’s on a rally you don’t buy as much as you do on the second or third day of it going down again.”
Tyson said some farmers in his area decided to increase their oat acreage after the Canadian Wheat Board’s first Pool Return Outlook for 2004-05 was issued with sharply lower wheat prices forecast.
“That made people look around,” said Tyson.
But now that the CWB has raised the PRO, some farmers are beginning to reconsider moving out of wheat.
“Most of the guys are keeping their options open,” Tyson said.
