Who would have thought the lightly-traded, corn-following C.M.E. Group oats futures would be one of the most active agricultural contracts in June? Since trading in the $1.90@2-a-bu range since early May and setting a multi-year low of $1.90¾ on May 17, nearby July oats soared nearly 45% to a five-month high of $2.74 on June 15, including a gain of 82c since June 2. Prices eased slightly later in the week.

The spark in the oats market resulted from extremely wet weather, mainly in Saskatchewan, Canada’s largest crop-producing province and a major source of U.S. food-grade milling oats. In its March planting intentions report, Statistics Canada forecast 2010 oats seedings near 4 million acres, up 7% from 2009 but down 8% from 2008. Traders estimated 2009-10 carryover stocks of oats in Canada will be around 550,000 tonnes, the bare minimum needed to ensure uninterrupted supply of good quality milling oats if planted area actually hits the intended target. But the Canadian Wheat Board estimated as much as 12 million acres of Canadian cropland may go unplanted this year. While it was not known how much of that area will be lost oats acres, the market seemed to think it will be sizable. Because of the June 20 deadline for crop insurance, farmers had to decide during the past few days whether to take an insurance payment of $50 an acre or take the chance it may dry out in time to plant oats — without insurance. Working against the latter decision was the threat of frost in late-planted crops given Canada’s short growing season. Oats millers said some farmers already told them their contracted oats would not be planted. At the same time, farmers with 2009-crop oats still in their bins were holding it tightly as they watched both futures prices and basis levels rise more than a combined $1 bu in just a couple of weeks. The wetness also was expected to significantly reduce canola, spring wheat and durum plantings in Canada.

What oats millers now must deal with is uncertainty – whether there will be enough Canadian oats for 2010-11, where else in the world they might be able to source oats and what it will cost.