Crop development | Industry officials unsure of how to kick start prices
Hearing about oats’ benefits as a human health food and horse feed while not seeing profits show up on the bottom line could drive farmers to distraction.
That frustration underlay the recent Prairie Oats Growers Association annual meeting, where speaker after speaker noted the disconnect between the market price of oats, which doesn’t show much premium value to other cereal grains choices, and the vaunted healthful attributes of the ancient crop.
“Why is the industry so reluctant to pay a decent price for oats,” asked one puzzled farmer.
“If you pay a little bit more for the oats, you’ll have all the supply you want. That’s what it boils down to. It’s a real easy fix.”
The combination of mediocre prices and lagging yield gains has prompted many farmers to walk away from the crop.
It’s a situation that was highlighted by Pat Van Osch of Richardson International, Canada’s biggest buyer of oats since assuming Viterra’s operations.
“We understand that at the farmer level these are business decisions and it’s about return for the acre and to remain competitive we have got to have varieties that are going to be competitive,” he said.
A higher price per bushel or a higher yield per acre would quickly solve the acreage problem, but no one at the annual meeting was able to offer easy ways to achieve it.
A variety of factors undermine oats’ competitive position:
- Oat variety breeding research receives $4 to $5 million per year. Corn variety research receives $1 to $2 million per day.
- The Chicago oat futures contract suffers low liquidity and could disappear, making the crop harder to price, hedge and understand for farmers and processors.
- The horse feed market has shrunk, and some doubt it will ever recover, challenging a key secondary use for oats.
- Farmers are able to grow large enough supplies that the high value health uses are easily supplied, removing the crop’s ability to demand an overall premium.
“It is one of the healthiest foods out there, yet we struggle to push this forward,” said oat market analyst Randy Strychar, who has been directly involved in trying to re-establish the horse feed market.
A vicious circle is hurting oat agronomics, with lower net returns for farmers causing production reductions, which in turn cause less money to be invested for variety development.
Strychar said nothing is likely to change until farmers make more money growing oats than other crops.
“It’s quite simple,” he said.
“We’ve got to put value back into the oat industry for both growers and end users. It’s not complicated. It’s really simple.”
Agriculture Canada research scientist Nancy Ames, who has developed an oat-based pasta, said producing new products that help improve farmer returns is one of her main concerns.
“We need opportunity to add value to the producer,” said Ames.
However, that is hard to do in the present crop-to-crop competitive environment.
POGA director and past-president Bill Wilton said researchers are developing new products, but it is hard to find food processors and marketers willing to commercialize them.
“We have great potential here, (but) we haven’t got an advocate,” said Wilton.
“Can we be the advocates?”
That seemed to be what a Pepsico representative thought was needed: farmer-based research and development into new uses for oats.
“You have to think out of the box,” said Dave Kendra, highlighting the hundreds of non-food uses of corn developed partly through farmer-led research.
“The equine market’s not going to come back,” he said.
“You have to come up with new products for that, and it has to be driven by POGA and the growers. They have to take ownership of that or it’s just not going to be there.”
Van Osch said in an interview that individual companies could pay more per bushel for oats, but that would damage their returns on oat products compared to their competitors and eliminate the incentive to be in the oat industry.
He said research is the best way to unlock the crop’s premium value.
In his presentation, he called for the industry to keep working together on research to keep oats competitive because the real threat isn’t other oats product producers but other crops that reward farmers better.