Oats buyers filled for now, watching weather

CNS Canada — The hot, dry weather concerns supporting spring wheat prices across North America are also lending some strength to oats, but large old-crop supplies and a lack of significant end-user demand is limiting price movement for now.

“We’ve been bought up for old crop for months,” said Scott Shiels of Grain Millers Inc. at Yorkton, Sask., adding that farmers with old-crop oats are also getting optimistic and holding out for better prices.

“There’s not a lot of space at the end user,” added Ryan McKnight of Linear Grain at Carman, Man., noting most buyers are already contracted out to January 2018, which is keeping cash prices from rising to the same extent as the U.S. futures.

For new-crop, Shiels expected cash prices would be underpinned by the recent rally in wheat and the fact that Canadian oats acres didn’t quite live up to expectations.

“It’s bullish, but not really strongly bullish,” he said of the oats market. While end-users are relatively filled up for now, if the harvest is late his company will be back in the market in order to fill some commitments before the new crop arrives.

“We’re watching the crop in the field. If the harvest starts to be delayed at all we’ll have to come back to fill in a couple of weeks,” said Shiels, adding, “we don’t like to have more in the bins than we absolutely have to when the harvest begins.

Canadian farmers seeded 3.22 million acres of oats this spring, up from the 2.83 million seeded the previous year, but about 200,000 acres below earlier expectations, according to Statistics Canada data. Excessive moisture in northern Saskatchewan at seeding time limited some acres.

The overall increase in oats area on the year was due in part to disease issues in wheat in 2016. This year’s hot and dry conditions should be limiting the disease pressures for wheat.

With wheat prices also showing significant strength compared to last year, oats prices will eventually need to rise in relation to wheat if the industry wants farmers to grow the crop again in 2018, said McKnight.

“It has to keep up with wheat, or farmers will grow far fewer oats and more wheat next year,” he said. “So that should hopefully firm the oat price, as it relates to wheat.”

“That will definitely have an effect on (new-crop pricing). It will put us in a position where we’ll have to be back in the market buying acres again,” Shiels said.

New-crop oats are currently priced as high as $3.10-$3.35 per bushel across Western Canada, according to the latest Prairie Ag Hotwire data. That compares with spring wheat prices topping $9 per bushel in many locations.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow him at @PhilFW on Twitter.

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