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Oat Market Outlook. Prairie Oat Growers Assocation August 9, 2014 Randy Strychar. Current Situation. CBOT oat futures near 20 year highs Cash oat prices off crop year highs Relationship between futures and cash distorted Cash oat markets in relative balance
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Oat Market Outlook • Prairie Oat Growers Assocation • August 9, 2014 • Randy Strychar
Current Situation • CBOT oat futures near 20 year highs • Cash oat prices off crop year highs • Relationship between futures and cash distorted • Cash oat markets in relative balance • Corn the price leader for oats • Oat supply is chasing demand • World grain and coarse grain balances tight
What’s driving oat prices • Funds continue to dominate oat pit • Energy prices impacting grain markets • Crude oil • Ethanol • Canadian Dollar
Monthly CBOT Oats Continuous Monthly CBOT Oats
Canadian Oat Production • Highest production in 27 years • Manitoba record high – good quality crop • Lower than expected quality in Saskatchewan but huge crop • More than enough oats to meet commercial demand
Manitoba/Sask Production up • 27-year high production • Major driver of CBOT oats • Regions supports five oat mills - 90% of exports • Bulk of milling oat exports from this region
Canadian Oat Use • Average use 2.4 mmt • 07/08 raw oat exports forecast down 13% • U.S. feed demand down as oat prices too high relative to other feed grains • Milling use forecast up down 2% • One mill down • Expansion at another
Canadian Oat Ending Stocks 27 year high
Canadian Oat Ending Stocks • 07/08 forecast up 120% • 27-year high • Oat supplies up more than 800,000 mt • On-farm feed use sharply higher • Price may hold steady but demand is fairly inelastic • No off-shore feed demand
U.S. oat imports • 07/08 forecast mostly steady • Feed demand down to a 10-year low • Mill demand up slightly • Unlikely any Scan’s
Scandinavian oat production • Up 30% • Quality average to above • Most exports will remain in Europe • No subsidy will be granted this year • EU keeps import tariff • Overall trends continue to lower oat production • A non threat to Canada
The major threat for oat growers 800,000 surplus 2.5 mmt commercial demand More fed on-farms Higher end stocks
Monthly CBOT corn/oat spread - mt Range need to increase feed use
Things to watch for in the oat market • Crude oil prices • Fund activity • Canadian Dollar • CBOT corn/oat spread • CWB barley monoply • US & Canadian mills covered into end of March • Supply will chase demand – change from past six years where growers were in control of $
Price outlook • Manitoba $2.50 - $3.00 • Saskatchewan $2.40 - $2.90 • Alberta $2.30 - $2.75 • New crop 2008 bids at or above 2007 • CBOT oat futures steady to lower • Could lag corn • Corn the price leader • Cash basis levels will remain under pressure
Looking to 2008 • Oat prices have fallen relative to other crops • New crop bids up $.15 to $.20 vs. 2007 • Large opening stocks • 2008 Canadian oat area down 7% to 10% • Production drop of 800,000 mt • Ending stocks of 1.00 mmt • Commercial demand mostly steady at 2.4 mmt
“How to get the best price for your oats • Trust no one source and do your home work • Understanding supply and demand • Track markets, futures, cash, oats & corn • Look at seasonal trends • Marketing plan, change it if you need to, but have one • Understand markets are constantly changing, be flexible
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