Oat Market Outlook

1
Oat Market Outlook
November 17, 2009 Randy Strychar Oatinsight.com
2
Current Situation

• CBOT oat futures climb to 20 year high
• Cash oat prices approaching 5-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

3
Whats driving oat prices

• Funds continue to dominate oat pit
• Energy prices impacting grain markets
• Crude oil
• Ethanol
• Canadian Dollar

4
Monthly CBOT Oats

• Continuous Monthly CBOT Oats

5
Seasonal CBOT oat price trends
6
Nearby CBOT weekly close
7
Continuous Weekly Can-Oat Bid
8
Continuous Weekly Grain Millers Bid
9
Cash basis levels under pressure
10
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

11
Manitoba/Sask Production up

• 27-year high production
• Major driver of CBOT oats
• Regions supports five oat mills - 90 of exports

12
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

13
Canadian Oat Ending Stocks

• 07/08 forecast up 73
• Oat supplies up more than 500,000 mt
• On-farm feed use sharply higher
• Price may climib but demand is fairly inelastic
• No off-shore feed demand
• Bulk of milling oat exports from this region

14
U.S. oat imports

• 07/08 forecast mostly steady
• Feed demand down to a 10-year low
• Mill demand up slightly
• Unlikely any Scans

15
World Coarse Grain End Stocks
24 year low
16
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

17
The good and not so good news
18
Can-Oat Saskatoon Price Trends
19
Grain Millers, Yorkton Price Trends
20
The major threat for oat growers

• 500,000 surplus

Commercial demand of 2.4 mmt unchanged
Higher end stocks
More fed on-farms
21
Monthly CBOT corn/oat spread - mt
Range need to increase feed use
22
Canadian Dollar Crude Oil
23
Looking to 2008
24
Cash oat/barley spread
25
Change in Saskatoon Cash Prices
26
Canadian oat plantings
27
2008 Canadian oat situation
28
Canadian Oat Produciton
29
Canadian Oat Ending Stocks
30
Canadian mill price outlook

• Old crop
• Manitoba 3.00 - 3.50
• Saskatchewan 2.75 - 3.25
• Alberta 2.75 - 3.25

• New crop 2008
• Manitoba 2.75 - 3.70
• Saskatchewan 2.50 - 3.45
• Alberta 2.50 - 3.45

31
Should you grow oats in 2008?

• Yes!
• Low input costs
• Ease of marketing
• Forward contract program allows price lock for
  90 of quality grown
• Canadian oat production will fall minium of
  nearly 900,000 mt
• Oat prices will rise relative to other crops
• Commercial oat demand unchanged but inelastic

32
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

33
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

34
OatInsight
.com
.com
Improving your bottom line