Oats prices exploded to an all-time high on Friday, driven by ongoing supply issues in Canada, the second-largest oats grower after Russia. Although our northern neighbors had a sizable crop last year, they have been unable to find enough railroad capacity to ship the grain to US customers, creating a shortage in the US. This is resulting not only in a price rally, but also an unusual overvaluation of oats versus other grains. On Friday morning, oats were worth 20 cents per bushel more than corn, the first time that has happened since 2005.
Next Monday, the USDA will issue its monthly Crop Production and Supply & Demand reports, which will give updated information about US and global grain crops and consumption.
Interest Rates Drop
Despite reduction in the Federal Reserve's bond-buying program, bond purchases by investors have been rising recently as global traders sell off stocks in the US and emerging markets, especially Turkey, Argentina and Ukraine. Instead of investing in stocks that they view as risky, many investors are buying US government bonds, or Treasuries, and are willing to accept lower interest rates for the perceived safety of government debt.
Aggressive bond-buying continued on Friday after the US government released a sour nonfarm payrolls figure that showed only 113,000 new jobs created during January, less than the expectation for 181,000 new jobs.
On Friday, interest rates for the US government's 10-year Treasury note stood at 2.7%, near the lowest rate in two months. The 10-year note is of interest not only to the government and investors, but also to would-be homeowners, as the 10-year note is a closely-followed proxy for mortgage rates.
Gasoline Market Thaws
Over the last few weeks many drivers have been hunkering down at home due to the winter storms, which reduced short-term demand for gasoline, driving the price lower. That changed this week as market participants began looking ahead. Refineries are preparing to make summer gasoline and have begun shutting down to prepare for the transition, which is reducing fuel supplies. Meanwhile, some analysts are expecting a stronger economy to pump up driving demand this summer, which has helped to boost prices in anticipation.
On Friday, gasoline prices rallied to a one-month high, with wholesale March futures trading over $2.73 per gallon.