Oats Knows?

February 6, 2014 12:37 AM

What Traders are Talking About:

Overnight highlights: As of 6:30 a.m. CT, corn and wheat futures are trading 1 to 2 cents higher, while soybeans are fractionally to 2 cents higher. Weekly export sales will help set the price tone during the daytime hours. Cattle futures are called mixed this morning while hogs are expected to open firmer.


* Oats knows? The old market adage that "oats knows" is a reference to the fact the oat market is often a leading indicator of upcoming price action in other grains, especially the corn market. If that's the case, grains may be about to embark on a strong move higher. March oat futures have rallied more than $1 since the beginning of the year and pushed to an unusual premium to front-month corn futures overnight. Logistic problems in Canada are the reason for the sharp rise in oat futures, lowering the available supply to the market and rallying futures. The logistic problems in Canada aren't going away anytime soon. Sources in Canada expect the transportation bottleneck will last for at least three to six more months before there's any significant loosening.

The long and short of it: If the adage that "oats knows" holds true and that market continues to rally amid a supply crunch, it could cause corn traders to look past their bearish bias for that market and rally corn futures.

* Japan buying more U.S. wheat. Shipping delays with Canadian wheat supplies is causing Japan to buy more U.S. wheat, a trend that's likely to continue if Canadian logistic congestion persists, as expected. Bloomberg reports Canadian wheat shipments to Japan have been delayed the past two months. In this week's tender, Japan purchased 284,161 MT of wheat, with 153,689 MT of that total being U.S. supplies. "There were worries if shipments from Canada will be able to arrive or not, so we were asked (by millers) to take additional supply from the U.S.," a farm ministry official said.

The long and short of it: Increased demand for U.S. wheat from Japan will help, but it won't be enough to support a sustained rally in wheat futures. The biggest potential boost for U.S. wheat shipments may come when soybean exports slow and exporters put more focus on shipping wheat.

* Duracade corn 'sold out.' Syngenta says it has sold all of its Duracade corn seed for the upcoming growing season despite calls for the company to pull the product from the commercial market since it has yet to be approved by China and the European Union. The National Grain and Feed Association and North American Export Grain Association asked Syngenta last month to suspend sales of Duracade corn, which is commercially available for the first time this year, and Viptera corn, amid fears the unnapproved traits will cause further trade disruptions. The Viptera trait (MIR 162) is what has caused China to reject more than 600,000 MT of U.S. corn shipments.

The long and short of it: Until China gives approval for the Viptera and Duracade traits, there will be potential trade issues. But how picky China gets on U.S. corn shipments depends on their need for corn. If China needs corn, it will be a relative non-issue. If China doesn't need corn, the presence of unapproved traits in shipments will be an issue.



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