The bull market in old-crop oats is far from over.
Only heavy spring rains will change that situation.
That’s the view of Randy Strychar of Statcom’s Oatgrower market
analysis service. Supplies are so short now, and soil moisture
conditions so poor in important oats zones, that it will take a lot to
lift the fear from the market. There is not much old crop remaining and
prospects for growing the new crop don’t look good.
“I don’t see oat prices going anywhere until you get a good torrent of
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rain,” said Strychar.
“The market’s pretty edgy right now.”
Nearby Chicago oats futures prices jumped last week, which Strychar
said is probably more than a blip.
“This is the front end of another rally,” he said.
Ever since last summer’s poor oats crop came off, prices have been
strong and beating the best price expectations of many observers.
A few times oats futures prices have fallen substantially, such as
after December’s rally and in March, causing some to think the bull
market was over. Strychar said these were just small oscillations
within a big bull cycle.
Throughout the winter, cash oats prices have not fallen when the
futures have fallen, showing there has been no change in the underlying
situation of an extremely short crop being chased by too many buyers.
The surges and falls in futures prices have been caused by people
covering their short contracts and running up prices, followed by long
liquidation as speculators took profits, pushing prices down.
Once they had their profits, speculators took another look at the
fundamentals, saw there was still a dearth of oats and poor potential
for new crop, and went back into the market to buy, repeating the
cycle, Strychar said.
He said producers are getting greedy now, hanging onto what they have
in hopes of even higher prices. That may not be a bad gamble.
It is possible now to find $4 cash bids for May and June delivery and
“you may see $4.25 if it remains dry.”
The recent United States Department of Agriculture seeding intentions
report forecast oats acreage will increase by 16 percent. It predicted
an even bigger 33 percent increase in the acreage of oats harvested for
the milling market.
That caused some people to worry about new-crop prices, but Strychar
said he doubts USDA expectations will come true.
“It’s all predicated on these prices holding to harvest,” he said.
“If the price drops 25 to 30 cents, you’re going to see that number
tail off, probably be cut in half.”
The U.S. oats crop is almost irrelevant in the North American milling
market, Strychar said. It usually represents only five percent of the
market with Canada taking the rest.
That may be different this year if there is another tiny Canadian crop,
but any sign that Canadian production will increase to the point that
prices will drop will push U.S. growers to cut their oats in July for
greenfeed or sell into the feed market, Strychar said.
He also thinks Agriculture Canada’s forecast for oats acreage is
“extremely optimistic.”
It expects to see acreage increase by 30 percent and production rise by
48 percent. That would be disastrous for prices, probably cutting them
from present new-crop quotes of more than $2 US per bushel to $1.10 to
$1.20, but that is unlikely to occur.
Strychar expects to see only a 10 to 15 percent increase in acreage and
a 30 percent increase in production. Those expectations underlie
new-crop futures prices rather than the bearish USDA and Agriculture
Canada expectations.
