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The Learn About Futures Insider: Oats

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May 05, 2011 – Comments (1)

This cereal grain has a rich history of cultivation and has been used for both human and animal consumption for centuries. The CME Group futures contract - to which the following specifications will refer - provides a means for participants to engage in possible fair price discovery, attempt to manage or hedge price risk, and evaluate possible supply and demand trends.

Contract Size: 5,000 Bushels

Price Quote & Tick Size: Cents per bushel; minimum fluctuation is � cent per bushel ($12.50 per contract)

Contract Months: March, May, July, September, December

Trading Specs: Trades open outcry and Globex (electronic) per the following schedule:
Electronic: 6:00 pm - 7:15 am and 9:30 am - 1:15 pm Central Time, Sunday - Friday
Open Auction: 9:30 a.m. - 1:15 p.m. Central Time, Mon-Fri.

Daily Price Limit:  $0.20 per bushel expandable to $0.30 and then to $0.45 when the market closes at limit bid or limit offer. There shall be no price limits on the current month contract on or after the second business day preceding the first day of the delivery month.

Trading Symbols: Open Outcry - O; Electronic - ZO

http://media.barchart.com/cm/articles/cache/aafb7c65e2f9ff56d3967f13cbc11ba1.png
Past performance is not indicative of future results.
***chart courtesy of Gecko Software

Oat Facts
At least thirteen species make up the classification tables for oats, but the one most cultivated is the common oat - all 146 varieties of it. Early civilizations believed oats were contaminated wheat, but cultivation moved forward once it was recognized as a separate grain. Oats have a higher tolerance level for rain than other major grains, and require fewer hot summer days. These attributes likely contributed to the widespread cultivation of oats across more temperate growing regions.

The following chart illustrates production:
 
http://futurespress.com/imgndoc/laf/5-5-11%20production.jpg
*Data courtesy of USDA

Imports and exports for the most recent marketing year are as follows:

http://media.barchart.com/cm/articles/cache/cbd8e3dab56f168753bc0592bb822874.jpg
*Data courtesy of USDA
 
http://media.barchart.com/cm/articles/cache/abd1059789801c000148c9020d8cc151.jpg

*Data courtesy of USDA

Oat acreage in the United States has been on the decline since the beginning of the last century. This coincides with the fact that oats were often used as a feed grain for horses. As the number of horses within the United States declined after the introduction of the automobile, the need for oats have dropped as a result. The drop can be illustrated as follows:

http://media.barchart.com/cm/articles/cache/f773a90fc22ae5a142000b60139f2637.jpg

*Data courtesy of USDA

Alternately, the demand for other cereal grains may have been a contributing factor. Either way, the projected net return for an acre of oats is well below that of the other major planted grains, according to the USDA's projections.

http://futurespress.com/imgndoc/LAF/5-27-10%20oat%20returns.jpg

Oats are normally sown early in the spring or summer, since they are tolerant of cold, late frosts, and snow. The grain will normally go dormant in the summer heat. According to the USDA Agricultural Statistics Board's 1997 report, the usual planting time for oats in the top five producing states is between April and May. The harvest period usually extends from July through the beginning of August.

Like some other grains, oats have fertilizer and other input requirements. After harvesting, oats are cleaned, sorted, de-hulled, and then finished by either flaking or milling.

Key terms for this market include:


Rolled Oats - crushed grains that have literally been rolled into flakes and steam treated to make them softer.

Steel-cut Oats - the whole grain that is cut into two or three pieces, rather than being steamed and rolled.

Light Weight - Oats that weigh in at less than 36 pounds per bushel.

Key Uses


Oat hulls may be used as feed or processed into oat fiber. Flaked oats become the familiar "rolled oats", and milling produces oat flour and oat bran. According to the World Health Organization, oats may have the highest protein level of any cereal grain, nearly equal to meat, milk, and egg protein.

Oats may also be used in beer or found in skin treatments. Oat straw may be used by livestock producers as bedding.

Key Concerns

Weather - As with many field crops, weather conditions during planting, growing, and harvesting stages may impact progress.
Disease and Pests - Although reasonably free of pests and disease issues, there are a few leaf diseases which may impact oats. Leaf rust and caterpillars are key concerns. Some weeds may complicate harvest or impact yield.
Reports - Oats are included in key USDA reports such as Crop Progress, Crop Production, and the WASDE.
http://media.barchart.com/cm/articles/cache/dfed81e9e2a34b7a08a027460388843d.jpg

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Disclaimer:  There is a substantial risk of loss in futures trading and it is not suitable for all investors.  Losses can exceed your account size and/or margin requirements.  Commodities trading can be extremely risky and is not for everyone.  Some trading strategies have unlimited risk.  Educate yourself on the risks and rewards of such investing prior to trading.  Futures Press Inc., the publisher, and/or its affiliates, staff or anyone associated with Futures Press, Inc. or www.learnaboutfutures.com, do not guarantee profits or pre-determined loss points, and are not held monetarily responsible for the trading losses of others (subscribers or otherwise).  Past results are by no means indicative of potential future returns.  Fundamental factors, seasonal and weather trends, and current events may have already been factored into the markets. Options DO NOT necessarily move lock step with the underlying futures contract.  Information provided is compiled by sources believed to be reliable.  Futures Press, Inc., and/or its principals, assume no responsibility for any errors or omissions as the information may not be complete or events may have been cancelled or rescheduled.  Any copy, reprint, broadcast or distribution of this report of any kind is prohibited without the expressed written consent of Futures Press, Inc.

1 Comments – Post Your Own

#1) On May 06, 2011 at 12:23 AM, awallejr (83.97) wrote:

I have to rec this blog by virtue of the fact no one ever blogs about oats!

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