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Between 54-87% of retail CFD accounts lose money. Based on 69 brokers who display this data.

The Ultimate Guide to

Popular Grains for Trading: Oats

What are Oats?

The seeds from oat grass are known as cereal grain. They are harvested around the world and used as a food type. The benefits of harvesting grain are that they can be easily stored and transported without spoiling, and can be used to create a variety of other products, such as flour.

Although oats are associated with human consumption, their value as livestock feed should not be underestimated. In fact, in many places the vast majority is used for this purpose, although the ethics surrounding this are questionable as most of these animals are more naturally suited to eating grass than grain.

Oats are rich in nutrients, and have been shown to help reduce cholesterol levels when consumed regularly.

Oats History and Key Facts

Genetic evidence traces a form of oats back to the fertile crescent of the ‘Near East’, known as today as Western Asia. The domesticated oat that we are currently familiar with appeared relatively late in Bronze Age Europe. However, it has not always been well received – in Greece they were considered to be a deformed type of wheat.

Oats, like rye, are a secondary crop, which means that they are derived from the weed of the primary crops such as barley and wheat.

Oats were the fifth most important grain in 2016 in terms of their worldwide production figures. With over 1 billion metric tons produced, corn was the most important grain. 23 million metric tons of oats were produced, which is a great quantity, but it is dwarfed significantly by the corn production figures (statista).

Modern Day Statistics for Platinum Production

The Top Oat Producing Countries in the World 2014 (FAO.org)

Country – Production (Metric Tons)

1. Russia – 5273812

2. Canada – 2907000

3. Poland – 1458623

4. Australia – 1254659

5. Finland – 1039000

6. United States of America – 1019410

7. United Kingdom – 820000

The top 5 oat producing countries are responsible for over 50% of the oats produced globally.

What Influences the Oat Market

As with any edible commodity, there are various factors that can influence the price of the stock, including:

  • Weather: If the weather conditions have not been right for the crop to grow to its optimum quality, this can cause poor harvests and result in price changes.

  • Supply and Demand: As with all commodities, high demand and low supply will increase the price. As oats are a staple food source for many countries for humans and animals, there should always be sufficient demand for them. However, if production outstrips demand, resulting in stores building up, this can reduce the price.

  • Oat prices tend to run similarly to that of corn. However, one thing to note is that if corn or wheat prices are running high, farmers may plant these commodities instead of oats, which may impact the supply of oats.

  • Location: As the leading five oat producers are responsible for so much of the world’s production levels, any instability within these countries may have a significant impact on the industry. This is therefore an important consideration.

How are Oats Traded?

Futures are standardised, exchange-traded contracts where the trader agrees to take delivery from the seller of a specified quantity of oats at a predetermined price on a future delivery date. Options are similar, but give the trader the option at the end of the contract. Oats futures and options can be traded at the Chicago Board of Trade (CBOT). They are quoted in dollars and cents per bushel and are sold in lots of 5000 bushels.

Futures and options are mainly used by participants in the industry to hedge their price risks. This can be farmers, grain processors, millers, livestock feeders, and anyone in the food industry that requires oats for their food products.

However, these are not the only group to take advantage of the financial products that allow for this agricultural commodity to be traded, and speculators taking advantage of price swings in the commodity also make up a significant portion of market participants.

Contracts for difference (CFDs) are amongst the other financial instruments used to trade oats markets. They are an extremely convenient way to trade as they are offered by regulated brokers such as Plus500 and IG, and are available to access through their online platforms.

Oats - IG CFD

Oats – IG CFD

The Oats CFD offered by IG is based on the official price of the CBOT oats future. The minimum requirement for open a buy trade can be calculated as follows: Current price (225.6) * minimum contract size (1) * value of one lot (USD 50) * margin (5%) = $564.

Conclusion

Traders looking to take a position on oats can do so with a variety of financial instruments. Some of the most popular include CFDs as they are conveniently offered by many regulated online brokers, and they enable trading on margin, which means a smaller deposit can be put down to gain a greater exposure to the market. However, this additional exposure can work both ways, and if the markets go against the trader, this can result in them losing more of their capital than they originally placed to open the trade. Going with a regulated broker will mean that the customer’s interests are looked after by a set of stringent regulations that the broker is required to adhere to.

Between 54-87% of retail CFD accounts lose money. Based on 69 brokers who display this data.