Deciding what to do with 3CW oats is a tough call for farmers and marketers, who aren’t sure how prices will evolve this year.
“A No. 3? That’s anyone’s guess,” said Jared Seitz, director of the Agfinity online prairie grain brokerage.
Grain marketers say the most obvious approach to marketing this season is to sell and move moist, low-quality crops as soon as possible and hang on tightly to high quality crops.
It’s because the Prairies are overflowing with damp, damaged crops that are likely to degrade in storage, while top-quality crops are hard to find.
However, it is uncertain what to do with oats that are neither good nor bad. Marketers say farmers need to understand that the oats grading 3CW can, because of subtle differences, either go into the strong milling market or the low value feed market.
Analysts see both upside and downside for 3CW oats, depending on these differences.
It depends on how the market develops once the harvest glut is past and more is known about supplies.
Randy Strychar of Ag Commodity Research said farmers need to understand what matters in the milling market. Stained and discoloured oats are OK for milling, but sprouted oats aren’t. There’s no reason to hang onto anything sprouted.
“It’s the groat that’s the issue,” said Strychar.
Added Seitz: “Anything under 40 pounds, there are no benefits to storing it. Might as well get it out there before everyone else.”
However, year end oat stocks will likely be a razor thin 500,000 tonnes. Many millers and grain companies will be aggressively looking for 3CW oats for the milling market, making stained grain a non issue this year.
“Anything that’s 40 pounds or better, and it’s decent-looking and fairly clean, there will be buyers for that,” said Seitz.
Buyers are already looking for acceptable oat crops, even if they can’t take delivery now.
“Farmers don’t have to do too much. The buyers are coming to them,” he said. “Quite a few are on the road right now, heading all the way up to La Crete, Alta.”
Strychar said anything that’s not sprouted has a good chance of being categorized as milling quality, at least by later in the winter when stocks are disappearing.
“Anything you can dry down, anything that’s not overly sprouted.… If you have a 3CW that’s stained? On the whole it’s a good oat,” said Strychar.
“It’ll find a market down the road.”
Seitz said the oats feed discount will probably grow with time, especially because oats have recently been relatively stronger than corn and other feed crops. Being on the wrong side of the border will be a problem.
“My concern is that the (feed) price could trend down and the (milling) price trend higher,” said Seitz.
That’s what Brian Voth of Agri-Trend Marketing is telling his clients: the spread will get worse for feed-quality oats.
“Move low quality grain early, just in case the discounts widen out later on, once harvest is done and once quality is known overall,” said Voth.
Sampling and assessing oats quickly is key this year, with a huge spread at stake.
Strychar said farmers will almost certainly be rewarded for holding high quality oats, but that’s an academic concern at the moment be-cause grain companies and millers aren’t taking new crop anyway.
That will change once the grain companies and railways clear the remainder of the 2013-14 crop and find markets for the 2014-15 crop and its varied quality.
“Grain companies are going to be scrambling for elevations come spring,” said Strychar.
“The railways are going to be looking for business down the road.”
However, until then, farmers need to move feed oats by whatever means possible, many marketers say.
Seitz said local feed users will likely offer the best price because freight isn’t a big cost.