Oat prices could leap if the U.S. government carries through with a threat to penalize European exports to the United States.
But until the U.S. demonstrates that it is serious, the markets aren’t going to get scared, says an analyst.
“Everyone’s expecting it to come off the list,” said Randy Strychar of Ag Commodity Research about the U.S. Trade Representative’s list of possible tariff targets.
“But if it stays on, you’re talking about 25 cents US a bushel higher (for oat prices.)”
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Oats were included in a list of European exports that the American government might attack. The proposed oats duty of 1.6 cents US per kilogram works out to about 24 cents per bu., or a 14.6 percent tariff, according to the U.S. North American Millers’ Association.
NAMA has strongly argued against the proposed penalty.
“Retaliating against the (European Union) by imposing prohibitive duties on oat imports from the EU would be inappropriate, ineffective and would cause disproportionate economic harm to U.S. interests,” said Rick Cole of General Mills, a major oats processor. “It would impact the ability of a small but vital industry to provide American consumers with a basic staple food that is wholesome and affordable, but grown in insufficient quantities here in the United States,” said Cole.
Washington’s proposed actions are a response to changes in EU rules that have hurt American rice exports to the EU.
Also, the U.S. does not want to see European agricultural subsidies increased in step with the expansion of the trading bloc to 25 countries.
Strychar said few people are taking the oat threat seriously because a similar tariff was threatened in 1999 but never enacted. An oats tariff would hurt Scandinavian exporters, but that might not achieve much with the EU in general.
“If you want to get at the Scands, that’s a good way to do it,” said Strychar. “But I don’t think that’s the American government’s intent.”
North American millers would have a tough time getting supplies if European exports were held back.
Supplies of top quality oats look scarce because of recent bad harvest weather in Canada. Both the human consumption and horse feed markets need quality oats.
“If the (proposed duty) stays on, it’s a major problem,” said Strychar. “We’ve got so many quality problems that I’m not sure we could supply the whole horse oats market down there.”
The threat of a duty has already stalled some trade arrangements between EU exporters and American importers. Neither American buyers nor Scandinavian sellers want to be responsible for paying the duty if it is imposed, he said. “That trade has pretty much come to a screeching halt.”
