Canada Markets

March Oats Trade Below $3

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The March 2015 oat contract has fallen eight consecutive sessions, dipping below $3 per bushel Tuesday, the first time since June 2012 as seen on the continuous active chart. The middle study indicates the market is oversold (below 20%) while the lower study indicates weakening spreads or an increasingly bearish commercial trade. (DTN chart)

The oat market is searching for a bottom after eight days of losses which have seen prices fall 33 cents per bushel. Tuesday's intra-day low of $2.98 1/4 is the first time below $3/bu on the continuous active chart since June 22, 2012. Tuesday's trade ended 3 cents lower at $3.09/bu.

Commercial traders are becoming increasingly bearish, with the lower study indicating widening spreads or growing carry between consecutive futures months. The March/May spread, or blue line, is trading at a 2 1/2 cent carry (May trading over the March) after reaching an 11 cent inverse in the month of August. The May/July (red line) reached a 3/4 cent carry Tuesday, after trading at a 10 1/2 cent inverse in October.

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Noncommercial traders continue to hold a bullish net-long position, although the latest CFTC data indicates the size of that position had fallen by 262 contracts, or by 11.4%, to 2,039 contracts as of Nov. 18 from the previous week. The total open interest for oats fell 745 contracts from Friday to Monday's trade, which may be signaling aggressive selling by investors.

Bloomberg reports Tuesday that U.S. oat stocks have risen as Canadian shippers catch up from last crop year's back-log. CME data as of Friday, Nov. 21 shows oat stocks in warehouses declared for delivery totaling 13.182 million bushels, 2.3 times the volume seen in warehouses one year ago.

While the market may find psychological support at the $3/bu level, there is a band of technical support in the $2.78 1/2 to $2.85/bu range as seen at a number of weekly lows on the continuous active chart.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

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