The U.S. oat market soared to an all-time high, ignited by a razor-thin supply of oats moving into the United States from top exporter Canada in the wake of logistical nightmares.
Chicago Board of Trade oat futures rose the 20-cent daily trading limit - notching a record high of $4.63-1/4 a bushel and surpassing the previous record of $4.59-3/4 set in August 2008. That topped a month-long rally, with oats climbing 35 percent since early January.
Extreme cold and heavy snowfall this winter has caused railroads to run shorter trains and slowed movement of bulk commodities, crude oil as well as grains, out of Canada. The harsh weather, coupled with record-large Canadian wheat and canola harvests, has overwhelmed the Canadian National Railway Co and Canadian Pacific Railway Ltd, resulting in a shortage of some 40,000 grain hopper cars needed to move crops to port or U.S. customers.
Adding to concerns earlier this week was the possibility of a Canadian National Railway strike, but the rail and union struck a deal.
“The rally is not surprising given the transportation mess in Canada. Roughly half our oat supplies are imported on an annual basis and most of that comes from across the border in Canada,” said Shawn McCambridge, a senior grains analyst based in Chicago with Jefferies Bache.
“In the prioritization of who gets railcars, grain isn’t on the top of the list - it’s not the highest revenue. And within the grain list, oats is not at the top of that list either,” McCambridge said. “Supplies could be tight for some time.”
The United States imports more than half of the 160 million bushels of oats it uses annually to produce breakfast foods and snacks as well as feed for livestock. Oats are mostly fed to horses but they are also finding their way into pig diets this winter to help fight off the effects of a deadly pig virus, Porcine Epidemic Diarrhea virus, or PEDv, analysts said.
“There’s been sourcing delays out of Canada with their rail logistics and some increased demand due to the diet issue with PEDv going on. You want to put a little more fiber in the rations,” said Tim Emslie, a grains analyst for CHS Inc, the largest U.S. farm cooperative, based in St. Paul, Minnesota.
Canada, the world’s biggest oat exporter and second-largest grower after Russia, produced 3.9 million tonnes in 2013, the highest amount in five years.
U.S. grain traders also noted that for the first time in eight years, the price of oats surpassed corn on Thursday.
CBOT March oats, which trade a fraction of the volume of corn, closed at $4.56-1/2 a bushel on Thursday, up 13-1/4 cents, compared with March corn which ended down 1/4 cent at $4.43.
“When you get that type of a tension, it doesn’t take much to move oats sharply higher,” McCambridge added. (Reuters)