EDMONTON – The cost of filling the feedbag with top quality oats has gone up twofold in recent months.
Sitting down to breakfast porridge won’t cost much more though, as millers were able to take advantage of lower prices over the last couple of years, but their profits will be hurt as the product cost has doubled. Farmers, on the other hand, will be making up for lost margins.
Peter and Alma Kirylchuk, of Lac La Biche, Alta., grow oats and are happy with the increase in price.
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“If we have two weeks of frost-free weather the price should stay around $2. If we get frost then it will go even higher,” he said.
Low prices of the last few years were a result of a plentiful supply. As farmers abandoned oats in favor of higher value grains, stocks began to dwindle until now the U.S. supply is at its lowest level since 1866.
“You can’t blame people wanting to get out of oats. Wheat, barley, canola all have been doing well. The price is back and I think it’s here to stay for (a) while,” said Richard Nordstrom, a Viking, Alta., grower.
“You have to be patient with oats. The price will always come back. Especially if you have the right product,” said Kirylchuk.
His positive experience with oats comes from being able to market the crop effectively by having clean, high quality oats and sending out samples to brokers and grain buyers. He said that way when the customer needs pony or milling quality “they know you are out there.”
Errol Anderson is a commodities broker with Palliser in Calgary. He said the market this fall will be looking for 40-pound-per-bushel oats as its 1 and 2 CW quality and that the price should remain above the $2 mark.
Traders feel the 10-cent price decline last week came as profits were being taken and the price will recover as buyers look to fill smaller contracts.
Most of the demand is expected to come from millers in the northern U.S. Up to 90 percent of the Canadian oats product passes through Chicago rather than Winnipeg.
Buyers and sellers have reported problems with the Winnipeg Commodity Exchange price discovery for oats, possibly because the supply through that market is too low to be stable.
If any single seller moves too much product or a buyer aggressively acts to fill larger contracts, the market can move the limit in either direction, making it impossible to hedge with consistency.
“If there is a frost then the market is likely to accept 38 lb. oats as 1 CW, but it will mean lower prices for the poorer qualities and a big split in that market,” said Anderson.
Adds Kirylchuk: “As long as the frost stays away for another two weeks we’ll be OK. Right now there is a lot of green oats out there.”
“The upside of a frost is any of 40 lb. or better will just go crazy,” said Anderson.
