The grain market uses numbers and statistics as fuel.
It’s a flex-fuel engine, however, with prices sometimes propelled with interesting and unusual numbers rather than the big ones.
That appears to be the case at the moment for some prairie crops, with canola and oat prices stronger than one might expect in the face of bearish statistics.
Last week Statistics Canada put canola stocks at 1.8 million tonnes as of July 31, which was substantially higher than many trade estimates. Usually that would cause prices to fall, but the market has remained strong.
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The reason, according to Ken Ball of Union Securities in Winnipeg, is that canola is following the lead of soybean oil, and the market decided to ignore the Statistics Canada stocks number and instead focus on the U.S. Department of Agriculture soybean oil stocks number.
The USDA projected domestic soybean oil stocks will tighten more than traders and analysts expected. That kept soy oil prices strong.
“If you have 40 cent bean oil, (which is very high compared to long term averages), you’re going to have canola in these areas, regardless of how much supply you’ve got,” said Ball.
On Sept. 17 the Winnipeg Commodity Exchange November canola contract was trading around $442 per tonne.
A weekend frost in the U.S. soybean belt added support.
Oats prices also rose, even though Agriculture Canada’s crop production forecast is the largest in 30 years and ending stocks are forecast to be the largest in 27 years.
Chicago Board of Trade oat prices are off the June high of $2.95 US per bushel, but they have recovered from the late August level of about $2.50 to reach $2.82 Sept. 17.
The high production and stocks numbers have buyers expecting prices to slump as farmers dump crop into the system, said Randy Strychar, oat analyst with Ag Commodity Research.
However, those buyers are ignoring other vital numbers: bin space and overall crop prices.
“We have less grain on farms than we had last year,” Strychar said about the Statistics Canada grain stocks estimate.
“It’s kind of hard to conceive that they’ll be dumping into this market any time soon.”
Farmers have more bin space this year than last, so holding oats won’t be a big problem for most.
Also, most farmers have pre-sold about 50 percent of their oat crop this year. Many can deliver their contracted production and wait until late spring or summer to sell the rest, which is longer than buyers can wait.
Strychar said commercial oat users have tied up their supply needs until the end of December, but from December on they need to buy another 1.4 million tonnes.
