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What Moves the Oats Futures Price?

oats price study
Oats is a cereal grain which is mainly consumed in the form of its seeds and oats futures price is relatively volatile. While this cereal grain is fit for human consumption, it is mainly used as feed for livestock.

Producers of Oats

Oats are grown all over the world in places where the weather conditions are temperate. The European Union, Russia and Canada are the major growers of oats (17 million tons), with production in the United States being a little less than 2 million tons per year. The annual production of this cereal in the world is 25 million tons. 

Oats are annual plants and are planted in autumn for a summer harvest or in spring when it is then harvested in the early autumn. Human consumption of oats is stated to be between 5 and 10 percent of the total production.

Daily Oats Prices (CBOT)

Uses of Oats

Oats that are fed to livestock, who are the major users of this cereal, are rolled or crimped as this helps the animals to digest the grain. Humans consume it in the form of porridge, though there are other uses like brewing beer, making bread and as a thickener for soups.

The outer casing of the grain called bran contains a lot of soluble fiber and is said to help to lower cholesterol. Straw from this grain crop is also used as feed for cattle and horses.

Factors Affecting Oats Yield and Oats Futures Price

Oats are fairly free from diseases and pests and yields can vary depending on the earliness of planting and the weather. Water requirement is also important and drought conditions leading to shortage of water can affect oat yields.

The acreage used to plant them is also a factor that can determine the quantity that will be grown and thus its price in the international market.

It is these variations that govern the total availability of oats in the market, and shortages caused by any of the factors can lead to higher oats futures price. Bumper crops on the other hand can depress oats futures price.

oats point and figure chart

A trader in oats futures will be very aware of all these conditions and will make an informed guess about the trend of prices before he buys a standardized quantity and quality for delivery at a future date. Such contracts are traded on a futures exchange. The buyer buys with the hope that the actual price when the material is delivered will be higher, thus allowing him to sell the contracted quantity for a profit.

Hedging Against Oats Futures Price Increase

Oats futures are bought in the futures market just like grain futures or commodity futures. Futures exchanges decide on lot sizes, a common lot size  being 5000 bushels which is equal to 86 metric tons. Futures prices are quoted in dollars and cents per bushel on the Chicago Board of Trade.

Producers try to lock in the best possible price for themselves while other people who have businesses in the grain either as feed suppliers or other manufacture will buy the futures so that they are assured of the cost of the cereal that they need and can plan their business accordingly.

There are a lot of speculators who are into trading in oats futures. They profit from the constant oats futures price movement and make their profits from these rather uncertain movements.

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