What does demand-pull look like?
It looks like the $94 million oat-processing plant just announced for the western edge of Winnipeg. That 250,000 tonne per year plant, expected to be built by Paterson GlobalFoods beside its existing large elevator, is the way the market says that something has both value and potential.
It’s the clearest statement in the world that some smart people believe oats has a great future, spoken in the most honest language: money.
It’s also a badly needed signal to farmers that oats is not a crop of the past, slowly dropping off the radar as more profitable options shove it out of the rotation.
Paterson, presumably, will want to be running this plant at capacity, and for that it will need to draw in sufficient grain, and for that it will need to speak in the language of money-to-growers.
This plant is an expression of future demand, and farmers will be in the nice position of feeling their grain pulled there.
There nothing revolutionary about building an oat plant on the Prairies. There’s one nearby in Portage La Prairie, as well as a number further west. Lots of oat processing is done south of the line.
But oats were beginning to feel a bit dusty in recent years. Acreage was suffering and prices just never seemed to suggest that buyers and the market were that desperate to preserve acreage. Farmers were finding better options, especially in the Red River Valley, and existing buyers have seemed willing to see oats fall into the special crops category, where contracting rules.
It was a sad and puzzling situation for oats because the crop had been a pioneer in the “healthy” foods category, getting the first approved health claim and becoming core to many health-based diets.
Beyond its beta-glucan claims, oats became popular in low-carb and whole grain diets, which exploded in popularity in the 2000s.
It’s still central in many “healthy” diets, but its spotlight has recently been stolen by the plant protein craze, and in a way, has begun feeling a little dated as a product.
But Grain Millers’ 2017 decision to expand its Yorkton plant with a $100 million extension, and this investment of $94 million by Paterson, suggest oats might just be momentarily in the shadow of other food trends.
Farmers believe in oats. They know it’s good food. They’ve paid for lots of research to show it.
But they need to see the money in order to justify growing it.
In the last few years, farmers have been on the cost-push side of the oats economy, in which relative returns have been falling as demand fails to offer the rewards farmers have been looking for.
This new plant might be the sign that oat growers might finally be getting over to the demand-pull side of the oats economy, in which demand begins chasing supply.
That would justify not only seeding oats, but also feeling good about it.
It’s been a while since oats seemed like a smart seeding choice in many traditional oat areas.
Maybe oats’ time isn’t in the past, but the future.