Burdensome oats supply depresses bids

(Resource News International) — Cash bids in Western Canada for both old- and new-crop oats remain very unattractive to producers and there is little to suggest values are going to see any kind of significant improvement in the very near future.

Old-crop cash bids for oats have eased over the past couple of weeks while new crop bids have also moved lower. CBOT (Chicago Board of Trade) corn futures, on the other hand, have climbed significantly.

“The correlation between the two has definitely been lost, but most of that can be tied in part to the fact supplies of oats remain in the burdensome range,” said Chris Beckman, a coarse grains analyst with the market analysis branch of Agriculture and Agri-Food Canada in Winnipeg.

Supplies of oats in Canada at the end of the 2008-09 season are expected to be at record-high levels, Beckman said.

AAFC, in its April 30 supply/demand update, pegged Canada’s 2008-09 oats ending stocks at 1.2 million tonnes. This compares with the 2007-08 oats ending stocks level of 950,000 and the 2009-10 forecast of 900,000.

“The extremely large carry-in supplies of oats, combined with expectations of a fair-sized crop in 2009-10, just has not created any concerns about end-users being able to secure a supply base for their requirements,” Beckman said.

In fact, some of the U.S.-based end-users are the ones holding onto warehouses full of Canadian oats still and have been making money off the storage, he said.

Statistics Canada, in its April 24 acreage survey, said Canadian oats area in 2009 would be 3.955 million acres, which would be down from the 4.345 million seeded in 2008. Market participants had been expecting seeded area to be in the 3.8 million- to 4.2 million-acre range.

“Substantial decline”

“The area that will be planted to oats in Canada could still be much lower, but it will need a substantial decline to make the end users begin to take notice,” said Mike Jubinville, an analyst with ProFarmer Canada in Winnipeg.

He estimated oats area in Canada in the spring of 2009 would be closer to 3.5 million acres.

“Right now, the end users are absolutely confident they will be able to secure the necessary supply for their milling needs, and until that changes, the values for oats are going to decline further,” Jubinville said.

“The correlation between U.S. corn and Canadian oats is probably the farthest apart it has ever been, and there’s indications that the spread will continue to deteriorate further yet based solely on the supply issue.”

Old-crop oat bids in Saskatchewan, delivered to the elevator, according to Prairie Ag Hotwire, currently range from $1.62 to $1.80, in Manitoba from $1.92 to $1.98 and in Alberta from $1.75 to $2.50 a bushel.

New-crop bids in Saskatchewan were $1.84 to $2.20, in Manitoba around $2.25 and in Alberta at about $1.93.

As of April 15, old-crop oat prices in the western Canadian cash market ranged from a low of $1.62 a bushel in Saskatchewan to a high of $2.31 a bushel in Alberta.

New-crop prices for oats on April 15 had been around
$2.25 a bushel.

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