We’ve all been annoyed by the slow movement of grain in Canada. What happens to oats prices if/when things start to improve though?
We covered the transportation issue of Canadian grain a few weeks ago, with special mention of how oil movement has increased while grain has dropped.
It’s clear that grain transportation by rail, as well as grain handling capacity, are scoring very poor again this year. Therefore, we wanted to assess whether 2017/18’s outcome is going to be as bad as the 2013/14’s transportation issue.
Using that crop year as a benchmark, here’s a review of where we could see things heading in the next few months as relates to oats prices.
First though, a refresher.
A bumper harvest filled Western Canada’s grain handling system to the brink in fall 2013.
Temperatures were bloody cold, trains were not moving whatsoever, and producers were left with very few marketing options over the winter of the 2013/14 crop year.
On one hand, farmers were unable to deliver their crop. On the other hand, they were dealing with depressed prices and very weak basis levels as commercials were simply signaling that they did not want to buy their grain.
Finally, in March 2014, the Canadian government intervened by imposing regulation on railroad companies. In particular, they asked the railroads to allocate a certain number of railcars to ship grains so that the backlog could be cleared.
Thus, we figured it would be interesting to look at export volumes from this time back in the 2013/14 crop year, to where we’re at today. We’re specifically looking at the previous 6 weeks, as well as the next 6 weeks. We then are comparing this against Ag Canada’s forecast for full-year export numbers.
Where the data is available, we also looked the basis levels or cash prices of the crops, again comparing things today to where they were in 2013/14 (and where they went from March 2014 onward).
So what does it look like?!?!
Let’s first look at total grain exports.
As the first chart below shows, from week 25 (basically the end of January) to week 31 (the beginning of March), total Canadian grain exports are sitting at 24.8 million tonnes. tracking a bit behind the 3-year average. Further, they are ahead of the 2013/14 pace of all Canadian grain exports.
Thus far in 2017/18, according to CGC, year-to-date volumes of all exported grains are at 24.8 million tonnes. This basically matches the 3-year average but is in fact nearly 16% (or roughly 3.3 million MT) higher than the same period in 2013/14.
What is likely going to happen as we roll through the next 6 weeks?
Well, the ideal situation is that Canada’s grain handling system will run at a very fast pace to achieve Ag Canada’s export target. To meet the 46.2 million tonnes of total Canadian grain exports forecasted for the 2017/18 crop year though, the pace of exports will have to nearly double!
Quite simply, this would mean that Canadian total grain exports would have to jump to more than 1 million tonnes, from the 600,000 tonnes or so that’s been shipped out weekly right now.
Looking into oats specifically, total Canadian oats exports year-to-date are pegged at 977,000 tonnes. This ahead of both the three-year average and where we were sitting at this point in 2013/14, of 696,000 and 797,000 tonnes respectively.
This being said, as the second chart depicts, exports in the last two known weeks are behind both the 2013/14 and 3-year weekly average pace. Put another way, it looks like Canadian oats exports from licensed facilities are running out of steam in the past couple of weeks.
Let’s look at oats prices now. We used Saskatchewan Agriculture’s prices for oats 3CW.
Using Saskatchewan Agriculture’s dataset, as the third chart shows, oats prices dipped in 2013/14. This was likely due to the fact that a lot of other grains had not been moving through the system and thus, storage availability was limited. Basically, no one wanted to buy anything because nothing was moving!
However, in a similar vein, oats prices were weak in 2014/15 and the bulk of 2015/16, except for a rally late in 2015/16.
Oats prices have improved in 2016/17 and since then, they’ve continued to track above the previous three-year average.
Looking bigger picture, we see that oats prices were very volatile across the time span of the chart. There are lots of ups and downs, but there’s no real statistical pattern here, other than maybe some seasonality.
To conclude, it is hard to say whether the transportation matter got out of control for Canadian oats in 2017/18.
Cash oats prices aren’t as bad as they were in 2013/14, which is a good thing worth considering.
While we’re only sitting at 60% sold on old crop and 0% sold on new crop, we have been seen some decent movement on the FarmLead Marketplace lately.
For the record, all closed deals in the past two weeks have been FOB farm / on-farm pick-up, so what you see below is all net-back-to-the-farm-gate…no trucking involved! They’re also all for #2 or better CW oats.
In Eastern Saskatchewan and Western Manitoba, contracted oats prices have been sitting around $2.75 to $2.99 CAD/bushel picked up on the farm.
In Eastern Manitoba, we’ve been seeing things closer to $3.20 FOB farm.
In Eastern / Northern Alberta, traded oats prices on the FarmLead Marketplace have been around $2.75 – $2.90 FOB farm.
If these prices interest you, you’re in need of cash, and/or you’re not yet at 40% sold on 2017/18, old crop, you should post some of your oats today.