Oat futures prices have breached the $2 futures barrier.That has dragged down farmer hopes for what was believed to be one of the top two returning crops of 2010-11.Cash oat bids in Portage la Prairie, Man., have recently dropped slightly below $1.80 per bushel, taking them to within three cents of the September 2009 low of $1.76 and less than 25 cents above the June 1999 low of $1.55 per bu.”Canadian oat bids tumbling towards 10 year lows,” says a headline in the most recent OatInsight report.OatInsight analyst Randy Strychar said a supply and demand response could see cash oat prices fall lower, but farmer resistance will likely stop this happening.”Cash oat prices have fallen 80 cents per bu. since Jan. 1, 2010. This has many grower clients asking where the bottom is. It’s likely we’re within 30 to 40 cents per bu. of the low from a pure economic perspective,” said Strychar, noting that $1.40 per bu. is the lowest price most Saskatchewan and Manitoba farmers can sell oats without losing money.”The question is, will they sell oats at below current levels in volume? Canadian growers have over the past 18 months shown some stellar resistance in selling any volume of oats below $2 per bushel in Manitoba and $1.75 in Saskatchewan.”Farmer deliveries are 15 percent below year ago levels and 18 percent below the five-year average. This suggests farmers are unwilling to sell at current prices, regardless of the negative nearby outlook.Analysts don’t see substantial near term relief. But the post-harvest situation should improve, said Chuck Penner of LeftField Commodity Research.”What we’re seeing right now is that it has to carve out a bottom,” said Penner.”In this kind of a situation, the bottom takes a long time to carve out.”Penner said the current lows are the product of the lingering supply overhang that has weighed on markets for two years. Farmers produced a huge crop in 2008-09 with big ending stocks and 2009-10 will leave substantial stocks, which will carry into the new crop year.However, smaller production this summer and reviving miller and processor purchasing should build the foundation for stronger prices, Penner said. The increased miller demand is already appearing.”Oat exports have increased recently. Millers had a lot of good coverage over the winter and they are starting to have to work harder to get those supplies,” said Penner.”So far that hasn’t translated into higher prices because everybody still has that low price expectation … and there isn’t any shortage yet, but there’s still a potential for things to tighten up,” said Penner.”It won’t happen quickly, but we might see some tightness in the coming year.”
Read Also
Going beyond “Resistant” on crop seed labels
Variety resistance is getting more specific on crop disease pathogens, but that information must be conveyed in a way that actually helps producers make rotation decisions.
