Canada Markets

The old-crop U.S. oat futures have remained in a down trend since hitting a high of $3.58 1/4 per bushel on Oct. 24, well before the other grains reached their respective market highs. After reaching a short-term high on Dec. 9, the March contract has realized lower weekly highs for five consecutive weeks, with a sharp move lower on the week of Jan. 12 taking place which started with the release of the Quarterly Stocks Report in the U.S.

The Jan. 12 report indicated U.S. oat stocks at 62.2 million bushels, 29% above Dec. 1 2013, but still close to 25% below the five-year average for the same date. The same day saw the monthly supply and demand tables released, with no changes from the previous month. U.S imports are expected to reach 100 million bushels, up from last year's 97 mb, while ending stocks are expected to grow year-over-year to 30 mb, 20% higher than the previous year, but still well below the five-year average of 52.8 mb. Stocks as a percentage of total demand for 2014/15 could be viewed as comfortable at 18%.

Also weighing on this market was Statistics Canada's December acreage report which increased the size of Canada's crop to 2.908 million metric tonnes, above earlier expectations. As a result, Agriculture and Agri-Food Canada's December supply and demand tables increased ending stocks by 50% to 900,000 mt, below the 1.031 mmt carried out of 2013/14 but above the five-year average of 847,000 mt. While Canada's export potential was scaled back slightly from November's estimates to 2.050 mmt, which is also below the 2.209 mmt exported last year, week 23 data shows Canada's licensed exports to be at 497,100 mt year to date, 5.3% ahead of year-ago volumes. Given the depreciation in Canada's currency against the U.S., one should expect exports to exceed last year's volumes resulting in a tighter than expected carryout. Canada's north-south rail potential could be the limiting factor.

The attached chart shows prices attempting to rally from last week's lows although the move may have run out of steam in today's trade, with today's high failing to move above that of yesterday. The lower study indicates a recent sideways trend in futures spreads, a sign of a slightly bearish but neutral commercial sentiment. Also, not shown is the net-long position held by non-commercial traders or investors. The most recent CFTC data showed this position at 781 contracts (futures only), well below the average of the past five weeks of 1,244 contracts and the most recent high of 2,431 contracts net-long in mid-October. While investors continue to hold a bullish net-long position, their involvement is waning. Should this trend continue, prices could be pulled lower.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

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