Commodity Trading: Oats

Oats Futures Trading

Trading in the oats market is often profitable because oats are a staple in many industries and many world markets. The primary uses for oats include feed for animals and breakfast foods for humans. Additionally, oats are used in the manufacture of plastics, solvents, and other industrial products.

Oats Investing

Trading in oat futures and options at the Chicago Board of Trade (CBOT) gives investors the ability to earn a profit on swings in prices and gives farmers, ranchers, grain processors, millers, merchandisers, and livestock feeders a way to manage their price risk, whether they are selling as producers or buying for consumption.

Oats Futures Prices & Rates

Oat futures are like the other grain contracts traded at the CBOT, trading in both the electronic and open-outcry marketplace.

  • The contract size is 5,000 bushels.
  • Oats futures contract months are March, May, July, September and December.
  • The minimum tick is $0.0025 per bushel, worth $12.50 per contract, and the daily oats price limit is 20 cents, worth $1,000 per contract.

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Oats Futures Contract Trading Strategy

The U.S. oats trading outlook is favorable for continued expansion of grain trade among the three NAFTA partners, the United States, Canada, and Mexico. The oats market has benefited in many ways from NAFTA, and the Canadian oats are welcomed by U.S. processors, who utilize the product to shore up domestic oats deficits. U.S. oats production has declined dramatically to about 1.5 million acres over the years due to competition for acres from other crops and now meets just two-thirds of domestic consumption needs. As a result, U.S. oats traders and growers need to be aware of crop conditions in Canada and how changes in the value of the Canadian dollar relative to the U.S. dollar might affect pricing in the oats market.

Oats Trading Tips

As a feed grain, oats pricing tends to run in line with corn that is, the oats market will often track changes in corn production and demand. In some cases, oats can be a lower volatility environment to trade the feed grains market than corn. Several other points are worth noting: (1) Watch weather and other developments in the spring wheat areas stretching from the U.S. Great Lakes area to the Pacific Northwest as well as in Canada. This is the same area where most of the oats is grown, and oats will be subject to the same moisture or other influences as spring wheat. (2) When you look at acreage figures as an oats trader, be sure you are looking at oat acres harvested for grain. As a grass, some acres sown to oats are harvested for hay or used to graze livestock

Oats Trading Major Indicators

Oats prices are often influenced by changes in supply or usage reflected in U.S. Department of Agriculture (USDA) or Statistics Canada reports. The U.S. area devoted to oats production has been trending downward since farmers have been able to get higher returns from planting corn, soybeans and wheat or by marketing these grains through animals. Oats traders must pay attention to the oats market on a global scale and specifically in North America.

Oats Trading News

There are numerous sources of news for oats trading that may be helpful to traders. The Chicago Board of Trade supplies a daily newsletter and daily charts and performance on ticks and pricing for oats trading. The USDA provides regular reports that cover oats production and usage, in addition to weekly updates on crop conditions during the growing season and a weekly national grain market review. The National American Millers Association provides news and educational information to consumers. The Grains Council of Australia (GCA), and the Grains Research and Development Corporation (GRDC) provide information and news for the oats trade in Australia.

Oats Trading Information

Oats are sown in the spring, as soon as the soil can be worked. The major U.S. oats production area is in the upper Midwest although Texas also is a large oats producer. An early start is crucial to good yields as oats will go dormant as the summer temperatures climb. Oats are cold-tolerant and are usually not affected by late frosts or snow. Typically, the seeding rate is about 2 bushels per acre, either from broadcast planting or drilled in narrow rows, and the national average yield is around 60-65 bushels per acre although some areas can produce 80-100 bushel yields in good years.

Oats Trading History

Oats are native to Eurasia and appear to have been domesticated relatively late. Oats have a lower summer heat tolerance than other cereals like wheat, rye or barley, so are particularly important in areas with cool, wet summers such as northwest Europe, even being grown successfully in Iceland. Oats are an annual plant and can be planted either in the fall or in the spring although most of the crop grown for grain is sown in the spring season in the Northern Hemisphere.

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