“The weakness in the futures definitely has nothing to do with cash prices in the country,” said Scott Shiels of Grain Millers at Yorkton, Sask.

After some modest gains last week, the July contract for Chicago oats dropped 17.25 U.S. cents on Friday. Then, on Monday (June 8), futures dropped further, by 13.75 U.S. cents, to UC$3.1425 per bushel.

“The funds are really, really long and they are probably needing to roll out of the July contract,” said Ryan McKnight of Linear Grain at Carman, Man.

Oat prices are quite good presently, Shiels said; in Manitoba, prices were running at C$4.50-$4.75 per bushel and C$4 in Saskatchewan. “We haven’t seen C$4 oats for a while.”

Prairie Ag Hotwire listed oats in Alberta at C$4.

“As a miller, I pay what I have to pay,” Shiels said.

“We’re anticipating this extra demand to carry on for a while for oats for human consumption,” said McKnight, adding that oats have become difficult to find in Manitoba.

However, the jump in the Canadian dollar recently put a lid on further increases for oat prices on the Prairies, he said.

He also noted a lot of damaged oats came off the fields in western Manitoba and eastern Saskatchewan due to poor harvest conditions. For the most part, mills are accepting those.

“They do if they have to. It costs them too much to get good stuff and then they’ll start lowering their specs they require,” he said.

Shiels explained there is so little volume traded in oats on CBOT — a few hundred contracts per day, compared to tens or hundreds of thousands for other commodities such as corn or soybeans.

Added to that, he said there continues to be an annual discussion about oats being removed from the CBOT, but a final decision keeps being delayed. If oats were removed, he said, most likely it would never return.

“Given the amount of oats planted, a big surge in oat product demand, maybe we will see the futures start to be relevant again,” Shiels said, adding oats has almost become a specialty crop that’s very much a cash market.

Both said there have been increases in oat acres in 2020. In May, Statistics Canada estimated there would be a 6.3 per cent rise in Canadian oat acres, to more than 3.8 million.

Also last month, the U.S. Department of Agriculture (USDA) forecast an 11.1 per cent jump in U.S. oat acres, to three million. Those estimates are likely lower than what has been planted this spring, McKnight said.

Any confirmation of that will come June 11, when USDA issues its next supply and demand report. Statistics Canada isn’t scheduled to release its next set of estimates until June 29.

— Glen Hallick reports for MarketsFarm from Winnipeg.

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Statistics Canada estimated 3.952 million tonnes of oats will be grown in 2019, up considerably from the 3.436 million tonnes produced in 2018. But low carryover stocks from previous years means this report has neither a bullish nor bearish effect for oat prices.

“The bins are empty, the pipelines are empty, we saw the lowest ending stocks on record,” explained Scott Shiels, a grain procurement manager with Grain Millers Canada at Yorkton, Sask.

“Even with the 15 per cent increase in production, which is based off of the 20 per cent increase in acres, we needed all of this and more.”

While cash prices for new-crop oats are likely to stay around the $2.75-$2.80 per bushel range, futures prices may move lower. However, the oats market is largely cash-driven.

“We’re going to see buyers paying what they have to pay,” he said.

“Prices where they are today are pretty reasonable in that respect.”

— Marlo Glass writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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“It’s been a nice little rally up,” said Scott Shiels, grain procurement manager with Grain Millers Canada on the 35 U.S. cents per bushel rise in the CBOT oats contract since the beginning of January through to Wednesday.

With little fundamental reason for the upward move, he expected the activity in the futures was tied to short-covering.

“When such a small volume is traded, it can literally be one guy who’s short and trying to run things back up,” he said.

On the cash side, spot prices are holding steady around the $3 per bushel mark, with not much activity, according to Shiels.

Looking ahead to spring seeding, he expects to see an increase in oats acres with farmers already signing onto to delivery contracts.

While oats prices may not be that exciting, they’re still profitable and Shiels didn’t think there were many better options out there.

Protein discounts on wheat, malt barley trading near feed prices, and the tariff situation in pulses were also shifting interest away from those crops. Lower input costs and dry conditions favour oats as well.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting.

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“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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However, with many fields still unharvested from last year, a tipping point will eventually be reached when nothing will be seeded at all in some areas.

In the first Statistics Canada acreage survey for the 2017 growing season, seeded oats area was forecast at 3.4 million acres, which would be up 20 per cent from the previous year.

“It will be interesting to see what happens,” said Scott Shiels, grain procurement merchant with Grain Millers Canada at Yorkton, Sask.

Disease pressures in wheat were already drawing more interest into oats this spring, he said, with the persistent seeding delays creating even more interest in the relatively low-risk yet versatile crop.

Actual area could be up by 30 per cent or more on the year, he said, if the weather co-operates from here on out.

“As we get later seeding, that probably means more oats,” said Shiels. However, “there is a tipping point where it will start meaning nothing and rather than seeing more oats, we’ll see less and we could be looking at a rally.”

He noted farmers in a large portion of Saskatchewan’s oat growing region “don’t even have last year’s crop off and every time we turn around, they’re getting more rain.”

If those fields still aren’t being seeded by June, they may not be seeded at all. “It’s on a bit of a teeter-totter,” said Shiels.

From a pricing standpoint, oats futures at the Chicago Board of Trade fell off their nearby highs in recent sessions, but Shiels noted the futures are no longer a good indicator of Canadian cash prices.

Prairie Ag Hotwire is currently quoting spot oats prices as high as $3.15 per bushel in Saskatchewan and $3.25 per bushel in Manitoba.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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“We are seeing a huge influx of acres into oats,” said Scott Shiels, grain procurement merchant with Grain Millers Canada Corp. at Yorkton, Sask.

Disease pressures in wheat and barley were behind much of the interest in seeding oats, he said.

“We have more on the books than we’ve ever had for this time of year,” said Shiels.

Fusarium was a major problem in Canada’s cereal crops in 2016, but oats are less susceptible to the fungal disease, said Shiels.

Even when oats are infected, the fusarium is concentrated on the hulls, rather than the groats, he added. Oats are dehulled as they enter the mill, so testing has shown minimal fusarium in oat groats.

“We haven’t had to reject any (oats) this year because of fusarium,” said Shiels.

From a pricing standpoint, he described the current oats market as stable, with new-crop oats and the spot market both trading at around $3 per bushel in Yorkton.

Good demand was keeping values steady, he added, despite the expected increase in acres.

Canadian farmers seeded 2.8 million acres of oats in 2016, according to Statistics Canada data. That was down by 500,000 acres from the previous year.

Agriculture and Agri-Food Canada now forecasts seeded oats area in 2017 at three million acres.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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Major U.S. customers are well covered for the time being, “with enough to last for a few months worth of milling,” said Ryan McKnight of Linear Grain at Carman, Man.

Higher pricing was available from time to time from Canadian millers, he said, but buyers and sellers were generally very far apart on price.

McKnight’s company is currently at a zero basis relative to U.S. futures, which would normally be considered strong at face value.

However, with futures trading below US$2 per bushel, the zero basis only works out to about C$2.60 per bushel when the exchange rates are factored in. Manitoba farmers wanted at least $3 per bushel, McKnight said.

Quality issues with northern Saskatchewan’s crop were another issue in the oats market, keeping some supplies out of the regular channels, he said.

Looking ahead, McKnight said many Manitoba farmers had already contracted some oats area at about $3.25 per bushel for new crop.

However, with the current softness in the market, he expected actual seedings would be down on the year as many producers look to other options, including wheat and pulses.

“I cannot find anybody willing to pay what my customers want right now,” said McKnight. “We need somebody to start buying up some oat futures, to get the price back to levels we can do some business at.”

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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