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Oats are in a strong rally. Oats supplies are tight in Canada. 

 

Demand is increasing for high fiber containing food products which have promoted the growth of oats on a global platform. This is driven in a major way by the demand directed from the functional foods market. Rising health concerns among people who are health conscious have prompted the high growth rate of oats in the global market. Also rising consumption of oats to reduce excess body fat has also been identified to be one of the major drivers to this market.

 

Now that $2.70 has been broken I think Oats will try and target that magical round number in $3.00. Also the US dollar declining is certainly helping. At the time of writing, Oats was $2.77. There is absolutely no reason to short Oat right now so I can see further appreciation in the price.

 

This is only my personal opinion but within this post is a potential trade idea for those who can spot it. 

 

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Top 10 Oat Producing Countries Rank Flag Country Oats Produced (Thousand Metric Tons)

1 European Union 8,073

2 Russia 5,440

3 Canada 3,700

4 Australia 1,100

5 United States of America 717

6 Brazil 682

7 Chile 670

8 Argentina 660

9 Belarus 500

10 Ukraine 481

There is a real increase in demand for Oats. I accept that the price of Corn can play an important role in the price of Oats. One of the main uses of Oats is as a feed grain. So another feed grain such as Corn can impact on the price of Oats. So for example if the price of Oats goes up more than Corn then farmers may decide to switch toward Corn for their feed. This is simple 'Demand and Supply' fundamentals.

When trading Commodities I find using both 'Fundamental Analysis' as well as 'Technical Analysis' helpful as the fundamentals can help explain the technicals. One can begin to understand the narrative of the price action. Now if the price of Oats is lower than Corn, it is possible that the consumption of Oats can increase. If you look at the Corn and Oat charts over the last decades, you will see how they are highly correlated which is understandable. 

Potential Trade Idea from TrendFollower:

You may wish to consider applying 'hedging' techniques here and go 'Long' either Oats or Corn which is historically cheap whilst at the same time going 'short' either Oats or Corn which is historically expensive. It would be like a 'Pairs Trade'. This is just a potential trade idea that I would like to share with the IG Community. 

Just to highlight my point on this potential trade I am going to show you the chart for Corn and this will hopefully help you to understand my trade idea more.

Corn_20191123_12_31.thumb.png.5e68d1da8fc367d130f294684341dcea.png

There is no guarantee that this trade idea will be either successful or profitable so any traders should do their own research, their own analysis and ultimately make their own trading decisions based on their risk tolerance. 

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