Commodities: Oats
  1. Commodities: Introduction
  2. Commodities: Cocoa
  3. Commodities: Coffee
  4. Commodities: Copper
  5. Commodities: Corn
  6. Commodities: Cotton
  7. Commodities: Crude Oil
  8. Commodities: Feeder Cattle
  9. Commodities: Gold
  10. Commodities: Heating Oil
  11. Commodities: Live Cattle
  12. Commodities: Lumber
  13. Commodities: Natural Gas
  14. Commodities: Oats
  15. Commodities: Orange Juice
  16. Commodities: Platinum
  17. Commodities: Pork Bellies
  18. Commodities: Rough Rice
  19. Commodities: Silver
  20. Commodities: Soybeans
  21. Commodities: Sugar
  22. Commodities: Conclusion

Commodities: Oats

By Noble Drakoln

Although oats are one of the earliest domesticated grains, they have not always enjoyed a good reception. In Greece, for example, oats were considered a deformed type of wheat, and in England they were considered barely palatable even for livestock.

Interestingly, Scotland is the only region in which oats have been historically revered, and consequently they play a traditional role in Scottish cuisine. In fact, Scottish oats rank among the best worldwide, and command a premium in the market.

Most people know oats as oatmeal (89% of oat is eaten this way), or as rolled oat products. Oats are also a popular food choice for horses, cattle and chicken, and can be found in some brands of dog food. (Hedging with futures can protect those who buy and sell commodities from adverse price movements. Find out more in Grow Your Finances In The Grain Markets.)

A sample commodity futures contract for oats is shown in the following table:

Oats Contract Specifications
Ticker Symbol Open Outcry: O (CBOT)
Electronic: ZO (eCBOT)
Contract Size 5,000 bushels
Deliverable Grades
  • No.2 Heavy and No.1 at par.
  • No.1 Extra Heavy at 7 cents per bushel over contract price.
  • No.2 Extra Heavy at 4 cents per bushel over contract price, and No.1 Heavy at 3 cents per bushel over contract price.
  • No.2 (36 pound total minimum test weight) at 3 cents per bushel under contract price and No.2 (34 pound total minimum test weight) at 6 cents per bushel under contract price.
Contract Months March, May, July, Sept, Dec
Trading Hours CBOT Open Outcry: Monday-Friday
eCBOT Electronic: Sunday-Friday 6 and -
Last Trading Day The business day prior to the 15th calendar day of the contract month
Last Delivery Day Seventh business day following the last trading day of the delivery month
Price Quote Cents per bushel
Tick Size .25 cent/bu ($12.50/contract)
Daily Price Limit
(Not applicable in electronic markets)
1. 20 cents per bushel ($1,000/contract) above or below the previous day\'s settlement price.
2. No limit in the spot month (limits are lifted beginning on First Position Day).

Understanding Oats Contracts
Like every commodity, oats has its own ticker symbol, contract value and margin requirements. To successfully trade a commodity, you must be aware of these key components and understand how to use them to calculate your potential profit and loss.

For instance, if you buy or sell an oats futures contract, you will see a ticker tape handle that looks like this:

O8H @ 385\'0

This is just like saying "Oats (O) 2008 (8) March (H) at $3.85/bushel (385'0)." A trader buys or sells an oats contract according to this type of quotation.

Depending on the quoted price, the value of a commodities contract is based on the current price of the market multiplied by the actual value of the contract itself. In this instance, the oats contract equals the equivalent of 5,000 bushels multiplied by our hypothetical price of 385'0, as in:

$3.85 x 5,000 bushels = $19,250

Commodities are traded based on margin, and the margin changes based on market volatility and the current face value of the contract. To trade an oats contract on the CBOT requires a margin of $1,350, which is approximately 7% of the face value.

Calculating a Change in Price
Because commodity contracts are customized, every price movement has its own distinct value. A 1-cent move in an oats contract is equal to $50. When determining the CBOT's oats profit and loss figures, you calculate the difference between the contract price and the exit price, and then multiply the result by $50. For example, if prices move from $385 to 425'6, you multiply the difference, which is $33, by $50 to yield a contract value change of $1,650.

- Buy Sell Total Value
Oats Contract Price (1 cent move = $50) $385 425\'6 .40 3/4 cents or $2,037.50


Oats Exchanges
The futures contract for oats is traded in an open outcry format and electronically through the Chicago Mercantile Exchange (CME) group (CME, electronic Chicago Board of Trade (eCBOT).

Facts About Production
Oats are typically planted in the spring and early summer. However, owing to their tolerance to cold temperatures, oats are still capable of yielding a good harvest even in cooler weather.

In the U.S., oat production has seen a steady decline, largely due to the automobile. As vehicles replaced horses as the primary mode of transportation, the need for oats for horse feed diminished. As of 2008, the most recent year that oats reported a record crop was in 1945, with 42 million acres yielding 1.5 billion bushels of oats. Sixty years later, less than five million acres were allocated for oats, barely 10% of the size of 1945's banner crop. (Discover why controlled chaos can mean an exciting investment experience for you, in Take A Tour Of The Futures Trading Pit.)

About 50% of harvested oats are used for hay, and the other half is used for grains. U.S. oat production is centralized in the Midwest, with the Dakotas, Wisconsin, Minnesota and Iowa featuring as key players. Each acre of land yields about 100 bushels of oats.

Factors That Influence Oat Prices
The price of oats is influenced by the following factors:
  • Oats are hearty and can be found in various climates around the world. There are successful crops in Iceland as well as Northwest Europe. Oats are considered capable of tolerating cool, wet summers and have a tendency to lie dormant under extreme heat.
  • The Food and Drug Administration (FDA) has developed standards for oat quantities in products. A certain minimum amount must be in a product before that product can be declared capable of reducing the risk of heart disease. The product is required to have a minimum of .75 grams of soluble fiber in each serving. These guidelines spurred a health-conscious fad in the late 1990s that mirrored a similar oat fad in the 1980s.
  • Oats have untapped commercial potential. They are the only cereal with a protein profile similar to soybeans. With a protein range of 12-24%, oats have been deemed by the World Health Organization (WHO) to be equal in quality to meat, milk and egg proteins.
Conclusion
Oats are a unique type of grain that offer significant health benefits. However, with the rising popularity of soybeans and corn, particularly in ethanol production, oats are having a tough time finding their place in the market.
Commodities: Orange Juice

  1. Commodities: Introduction
  2. Commodities: Cocoa
  3. Commodities: Coffee
  4. Commodities: Copper
  5. Commodities: Corn
  6. Commodities: Cotton
  7. Commodities: Crude Oil
  8. Commodities: Feeder Cattle
  9. Commodities: Gold
  10. Commodities: Heating Oil
  11. Commodities: Live Cattle
  12. Commodities: Lumber
  13. Commodities: Natural Gas
  14. Commodities: Oats
  15. Commodities: Orange Juice
  16. Commodities: Platinum
  17. Commodities: Pork Bellies
  18. Commodities: Rough Rice
  19. Commodities: Silver
  20. Commodities: Soybeans
  21. Commodities: Sugar
  22. Commodities: Conclusion


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