MarketsFarm — While oats on the Chicago Board of Trade rallied recently, upward movement in cash prices was varied. Even as that rally came to its eventual end, cash prices on the Canadian Prairies did not budge a great deal.
Over nine consecutive sessions, the December oat contract at Chicago pushed higher by 29.5 U.S. cents per bushel, closing Monday at US$4.0375/bu. The next two days saw a correction as the price tumbled by more than 20 U.S. cents, with the December closing at US$3.795/bu.
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Meanwhile, Prairie Ag Hotwire tracked oat prices across Western Canada at $4.30-$5.26/bu. delivered on Oct. 19 and at $4.30-$5.55 on Monday, with the same prices the day after.
That phenomenon wasn’t confined to the recent shifts in oats, as Ryan McKnight of Linear Grain at Carman, Man. explained.
“That’s due to some market participants not hedging oats anymore. There’s a looser correlation to the oat futures but because the oat futures are liquid, you can see erratic moves one way or the other,” he said. “I’ve noticed that cash prices stick for a while, but they do follow the futures up or down.”
Mills and feed markets in the U.S. are quite often able to acquire oats for less than their Canadian counterparts, he noted.
“Canadian mills tend to have to pay eventually what the farmer wants for them, because there’s just not the warehouse storage like there is in the U.S.,” McKnight said.
In turn, that will sometimes mean “Canadian mills will be more aggressive in the short crops,” he said.
Another factor McKnight cited was the small volume in oat trading at CBOT. When compared to canola, corn, soybeans or wheat, the activity in oats is a very small fraction. That limited trading means one trader can easily affect the market.
“Linear Grain can push the oat market around just by our hedges,” he said.
While some in the oat industry would prefer if the commodity was taken off CBOT, McKnight said he firmly believes it needs to stay.
“It’s better if there’s a futures market for things. Buyers can make some their margins off of basis movements. In my opinion costs go up without futures markets,” he said.
— Glen Hallick reports for MarketsFarm from Winnipeg.
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November 02, 2023 at 06:35AM
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Oat cash prices don't immediately follow CBOT movement - Farmtario
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