Oat markets present prime selling opportunity

I was looking at a chart of Chicago oat futures and watching it slide down the rabbit hole, like most grain and oilseed markets these days. And as I periodically do, I canvass around for Prairie cash oat bids, generally seeing them hold up reasonably well, though maybe off their winter highs.

Line companies seem to be less inclined to share their cash bids these days. But the smaller merchandisers still quote bids in the $3.10 to $3.40 per bushel area in Saskatchewan (depending on location - the southeast is best) and $3.20 to $3.50 in Manitoba (with one quote was just under $4 per bushel for milling quality moved into southwestern Manitoba). Even feed value oats are priced as strong as I can recall at $2.75+ per bushel.

Prime selling opportunities

The big line companies though, from what I can decipher from their advertised bids on the board, are well under those levels. Bids quoted above should be viewed by farmers as prime selling opportunities when and where available.

Oat fundamentals remain solid, but you might want to consider boosting cash sales in a move to not get caught watching any sudden death-spiral as we have seen of late in other big crop markets like wheat and canola.

Oat fundamentals are solid, but producers may want to consider boosting cash sales right now. Tweet this

Tighter available supplies supported cash oat prices this winter, and my original inclination was to hold off selling our remaining old crop supply until the spring. But broader ag market uncertainties make me less willing to follow that plan today, especially in light of significant price setbacks we have seen in other markets over the past month.

Get out ahead

For oats, I want to get out ahead of any further negative spillover weakness from those other markets. Oat demand is a little lackluster in the spot market for most locations, but looks more promising for sales in deferred delivery positions into April and May. With current price inverses with new crop, I suspect users will do the best they can with available supplies, acquire only what they absolutely need for now, then look to replenish inventory later with less expensive new crop.

The market needs to stay higher priced today given the current imbalance of supply versus demand. But note cash pricing this winter has already been at a high level, with history and long-term fundamentals not supporting the maintenance of such price highs for too long.

The imbalance can be fixed through killing time in anticipation of new crop production down the road. Quite likely 2019 oat acreage will increase, even though new crop fall delivered bids do not match old crop. Cash prices need to remain strong in order to buy acres this spring.

But keep in mind the inconspicuous ways in which demand can fool us, including with a price high enough to choke off feed demand, users lowering their quality standards and users deplete inventory to fumes in anticipation of a large 2019 new crop reload.

Bottom line

Current oat cash bids should be viewed by farmers as prime selling opportunities when and where available.

Mike Jubinville of Pro Farmer Canada offers information on commodity markets and marketing strategies. Call 204-654-4290 or visit  www.pfcanada.com to find out more about his services.