Manitoba growers proximity to processing plant in Minneapolis means returns exceeding $100 more per acre than Saskatchewan growers
Oats prices are not at a level that will prompt many farmers to book deliveries.
“Canadian growers remain generally disinterested in oat values and have shown their disdain by limiting sales to this point,” said Oat Information analyst Randy Strychar in a commentary.
Prices are OK in southern Manitoba, but farmers have lots of other crops they can sell, say some analysts.
Saskatchewan farmers can make more money selling wheat now and believe oats prices will rise later this year.
“Unless they have a severe cash flow situation, they’ll be sitting on it,” said Art Enns, a farmer from Morris, Man., and president of the Prairie Oat Growers Association.
Oats generally follow corn and wheat prices, the leading price-setting cereal grains and cereals have been falling recently.
Manitoba farmers are generally seeing better per acre returns on oats than wheat at today’s prices, but most Saskatchewan farmers can make a significantly better return on wheat.
Strychar estimated at the end of September that a farmer from Morris, Man., could make a gross return of $275 per acre on oats and $242 on wheat, but a farmer from Yorkton, Sask., would make only $159 per acre on oats and $230 on wheat.
The difference is mostly caused by transportation charges and proximity to the main oat markets.
Manitoba is much closer to Minneapolis, the core of the North American oat processing industry, while most of Saskatchewan has a longer and more complicated route to that area.
Wheat mostly flows to the ports of Vancouver and Thunder Bay, and this year that route isn’t clogged.
Southern Manitoba also benefits from trucker interest in moving oats as a back haul.
“The truckers love it if they’re moving anything south of Winnipeg,” said Enns. “We have an advantage going to the U.S.”
Truckers carrying corn and other feed to the southern Manitoba livestock industry can return to the U.S. with their trucks full of oats.
Strychar said the problem for oat processors is that only 20 percent of Canada’s oats production is in southern Manitoba, with 50 percent of commercial production from Saskatchewan. Buyers who need oats soon will have to make prices more attractive than wheat.
“We are not expecting any more increase in grower selling of oats into the New Year unless oat values can show some strength versus wheat values in Saskatchewan,” he said.
Enns said many farmers don’t need to sell oats now because they had already priced much of their production.
“Anyone who’s growing oats seriously probably has some forward-priced well before the markets tanked,” said Enns.
Like many farmers in his area, Enns priced his oats at $3.25 to $3.35 per bushel at the farmgate, which is much better than today’s $2.25 futures price. Add a basis and today’s oat returns look dismal.
“A lot of those (early-priced) contracts are still being executed,” said Enns.
The North American oat processing industry relies on Canadian production but prices have been uncompetitive with other crops, leading to declining farmer interest.
Prices must rise to attract more acres.
“With quality issues popping up for oats across much of Western Canada in the form of weathering, attracting grower selling in a market that is dealing with a relatively tight oats balance sheet is critical,” said Strychar. “Looking forward, it becomes even more important for the North American oat market to buy acres next spring and replenish oat supplies in Western Canada. Unless oat prices rally versus wheat, in Saskatchewan this is not going to happen.”