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Oats know WHAT, exactly?

07/09/2014 @ 3:27pm

If you've been around agricultural commodity futures for a while, you've probably heard the old adage, "Oats know where corn goes." Cryptic? Yes. However, before high-frequency computer trading and before the trading world was as volatile and international as it currently is, traders used to watch other indicators in order to determine commodity price direction. Back then, this adage was one of those indicators. So what does it mean? Movement in the oat market was viewed an indicator for the direction the corn market would ultimately take. The idea is that oats are more of a pure market – not influenced as much by fund money or noncommercial traders.

While the correlation cannot be truly perceived as gospel, it is something that traders keep an eye on. After the recent $1.00 sell off, many are now hoping that corn futures find support in the $4.00 price area. While corn futures are chugging lower, as of this writing, oat futures are quietly moving higher. Some traders are hoping that maybe corn is close to a bottom. For now, $4.00 is solid technical and psychological support for corn futures.

We wanted to bring this to your attention, because many traders, producers and bloggers have been repeating this adage about oats lately. In fact, they are saying it with great passion, like one doing a rain dance on parched soil. Everyone is hoping oats knows something that could bring corn prices higher, so missed pricing opportunity can be regained.

On a weekly chart, oat futures tested the long-term uptrend just weeks ago, and support held, leaving the uptrend intact. Now, corn futures are testing long-term support levels. Many are writhing in angst to know if the long-term uptrend will hold intact as well.

We'll have to wait and see if oats know . . . or not.

If you have questions, you can reach Naomi at nblohm@stewart-peterson.com, or post a marketing question in the Women in Ag forum.

The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Neither the information presented, nor any opinions expressed constitute a solicitation of the purchase or sale of any commodity. Those individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report.  Futures trading involves risk of loss and should be carefully considered before investing.  Past performance may not be indicative of future results. Any reproduction, republication or other use of the information and thoughts expressed herein, without the express written permission of Stewart-Peterson Inc., is strictly prohibited. Copyright 2014 Stewart-Peterson Inc. All rights reserved.


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