Soggy Oats Rally – Could Corn Follow?

Oat prices have exploded this week, gaining over 10% in just three days on concerns about the quality and availability of Canada’s crop.

Canada is the world’s largest exporter of the grain, but cold, wet weather in the Canadian province of Saskatchewan has essentially halted harvest. A quarter of the crop still in the field, and some fear that it may not be harvested until next spring.

Furthermore, wet conditions are hurting the quality of the oats, which could render them unsuitable for human consumption. Fears of limited supplies boosted prices to a three-month high at $2.40 on Friday.

While sometimes ignored by traders, oats are thought to be a harbinger of future moves in the corn market by the old adage “corn follows oats.” Should that prove true again this year, a rally in corn would be a welcome relief to U.S. farmers who are finishing this year’s harvest.