Traverse City Record-Eagle

June 8, 2013

Futures File: Oats are on a roll, prices are sprouting

BY WALT BREITINGER
Columnist

---- — Oats prices sprouted higher this week, jumping over $4 per bushel on Friday morning, nearing a five-year high. Rains in states like North Dakota are delaying planting and hurting the quality of the crop, making the oats sitting in storage more valuable. During the last seven trading sessions, prices have risen a staggering 41 cents per bushel (+11.2 percent).

Although oats are regularly consumed by humans, they are predominately used as feed for livestock and pets. As a result, oats prices can move similarly to other grains, especially corn. After this recent rally, some traders are watching the oats for signs about the future direction of the corn market, following an old adage “Corn follows oats.” As of midday Friday, July oats were worth $4.11 and July corn was trading at $6.73 per bushel.

Natural gas deflates

Natural gas prices have dropped 47 cents (-11 percent) over the last two weeks, falling to $3.81 per million British thermal units on Friday morning. Analysts attributed the recent sell-off to higher-than-expected natural gas stockpiles. Inventories have been climbing due to unseasonably cool weather. Natural gas is widely used to generate electricity, making summer air conditioning demand a major factor in that market.

As a result of a boom in shale gas drilling, US inventories of natural gas are generally high and the price is low. The excess supply in the US has prompted increased attention to exporting natural gas to Europe and Japan, where prices can be three to four times higher due to limited supplies in those markets.

End of global stimulus?

An announcement on Thursday from the European Central Bank signaled that Europe, like the United States, may soon be done stimulating its economy. This caused a massive turnaround in the currency markets, as many traders expected Europe to continue stimulus longer than the US or Japan. As the markets reacted to the change, the US dollar plunged in value compared to the euro and Japanese yen.

By the end of the week, the euro had climbed 2.2 cents (+1.7 percent) to $1.32, while the yen gained 0.037 cents (3.7 percent), worth 1.03 cents, the highest price since mid-April.

Opinions are solely the writer’s. Walt Breitinger is a commodity futures broker in Valparaiso, Ind. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.