<\/a>Grains<\/u> –
\nThe old saying of course is \u201coats knows\u201d, but I found it somewhat humorous that virtually nobody knows what is going on behind the latest oats rally.\u00a0 I will state unequivocally that I know very little about oats, but I\u2019ve done some asking around to people that do know oat \u201cfundamentals\u201d.\u00a0 The answer I got was not exactly what I expected.<\/p>\n
I expected to hear the story surrounding a shortfall in Canadian production due to the wet conditions during harvest.\u00a0 To be fair, this certainly is part<\/em> of the issue, but as we have traded this months ago I was\/am reluctant to believe this was the sole reason for the price rally.<\/p>\n The key issue with oats right now apparently has to do with using glyphosate as a preharvest defoliate.\u00a0 I\u2019m told oats ripen unevenly, making it difficult to harvest.\u00a0 Due to low prices in oats recently, it apparently has become uneconomic to swath oats and later pick them up.\u00a0 The new common practice is to use glyphosate as it is cheaper and faster.<\/p>\n This had led to a problem, however, with oats for human consumption.\u00a0 Many end users are now not accepting oats that test positive for glyphosate and this is making a big difference in the cash price for \u201cquality\u201d oats.\u00a0 So, right now it might not be exactly a shortage of oats overall but a shortage of oats that end-users actually want<\/em>.<\/p>\n Obviously you can pull up a chart of oats and see what flat price has done, but look at what the spreads have done in just the past month.\u00a0 The market is telling you it needs something<\/em> here. End users also have to encourage producers to grow oats next year without glyphosate, and this is going to come at a cost.\u00a0 I was told by one producer he has been contacted by a mill looking for contracts on 2017 crop with guaranteed no glyphosate.<\/p>\n The question for us futures traders is, how much of this should matter to the board and how much is up to the cash market to figure out?\u00a0 The Oct\/Nov rally in oats, coinciding with Canadian harvest disruptions, also came as managed money traders were record short oats.\u00a0 Right now it appears the market has a relatively modest net long.\u00a0 This should mean the short squeeze is over.\u00a0 Still, spreads remain strong and the shortage of non-glyphosate oats obviously can\u2019t be eliminated until 2017 planting at the earliest.\u00a0 Some will point towards the \u201coats knows\u201d saying and try to draw towards a correlation with corn, but any correlation calc shows a flimsy relationship at best.\u00a0 Still, we all know by now to not let the facts get in the way of a good story.\u00a0 It\u2019ll be interesting to see how this all plays out.<\/p>\n So to repeat, I don\u2019t know much about oats myself and don\u2019t claim to be an expert. Let me know if you hear anything different.\u00a0 This will likely be my last mention of oats in 2017.<\/p>\n DISCLAIMER<\/u><\/strong>:<\/strong> Grains – The old saying of course is \u201coats knows\u201d, but I found it somewhat humorous that virtually nobody knows what is going on behind the latest oats rally.\u00a0 I will state unequivocally that I know very little about oats, but I\u2019ve done some asking around to people that do know oat \u201cfundamentals\u201d.\u00a0 The answer […]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[13],"tags":[],"yoast_head":"\n
\nThe information contained herein has been taken from trade and statistical services and other sources we believe are reliable. Opinions expressed reflect judgments at this date and are subject to change without notice. These materials represent the opinions and viewpoints of the author\u00a0 and do not necessarily reflect the opinions or trading strategies of Nesvick Trading Group LLC and its subsidiaries. Nesvick Trading Group, LLC does not guarantee that such information is accurate or complete and it should not be relied upon as such. Officers, employees, and affiliates of Nesvick Trading Group, LLC may or may not, from time to time, have long or short positions in, and buy or sell, the securities and derivatives (for their own account or others), if any, referred to in this commentary. There is risk of loss in trading futures and options and it is not suitable for all investors. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RETURNS. Nesvick Trading Group LLC is not responsible for any redistribution of this material by third parties or any trading decision taken by persons not intended to view this material.<\/p>\n","protected":false},"excerpt":{"rendered":"
