Oat prices are down, but growers should expect to see profits

High yields reported Prices for the crop have declined, but they haven’t fallen as dramatically as corn

Oat growers looking in their combine hoppers are likely happier than those looking at futures price charts.

However, those that like doing math in their heads are probably pretty pleased: a big crop is pouring in and at prices higher than $3 per bushel, most growers will be making tidy profits.

“The pricing side has held up pretty well,” Agri-Trend Marketing adviser Brian Voth said about oat prices that have fallen but have been much stronger than corn.

“If you’ve got the yields, it’s been a profitable year for oats.”

Oat yields are reported to be high in most oat-growing areas of the Prairies and the northern United States.

Voth said one of his clients averaged 170 bu. per acre across a half section and yields higher than 140 bu. per acre are common.

Quality is also reported as good across the Prairies, so there has been little to independently justify higher prices for oats.

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As well, U.S. corn, the feedgrain market leader, has been getting hammered as almost all lingering worries from the 2012 drought are buried by reportedly large U.S. corn crops.

Corn prices have fallen about $1 per bu. since June to $4.60, while oats have fallen only 70 cents to $3.15. That leaves oat prices reasonably valued, said Austin Damien of Frontier Futures in Minneapolis.

“A lot of people out there are saying that if we have $4.50 corn, maybe $3.20 isn’t so bad for oats,” said Damiani.

Oat futures are often knocked around by fund money moving into and out of the illiquid contracts, and a recent short-covering rally briefly drove oat prices back to $3.50.

“It was an excellent marketing opportunity for producers,” said Damiani.

Analysts said the rebound to $3.50 made the more recent sell-off seem particularly brutal, but compared to corn there’s not much wrong with oat price levels.

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Voth said oat prices have been nicely valued recently compared to corn, which has been another reason to sell.

Oat prices often became highly discounted compared to corn during the 2012 drought rally. Rather than the historical average of 60 percent value compared to corn, oats fell to 40 to 45 percent at times. However, it often hit a 70 percent-plus relative value in July and August, which was a sell signal.

Mike Krueger of the Money Farm held little hope for oats to escape the gravity of falling corn because harvest is likely to be bigger than most expected.

Combined with healthier stocks of corn, there’s no reason for much rallying.

“As long as everything is going to be plentiful and cheap, it’s going to be difficult for any feedgrain to show much,” said Krueger.

In his weekly oat market report, analyst Randy Strychar said oats continue to rise in value compared to the types of corn and wheat that go into horse feed rations.

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As a result, horse feed demand is likely to shrink.