Oats may prove too popular
Analysts are warning farmers to approach oat marketing and 1997 seeding plans with caution.
That’s a change from early 1996 when oats prices were very strong and talk around the crop was upbeat.
The optimism was based on what has been happening to oats in the United States. For decades the U.S. crop has been neglected and even discriminated against by government programs.
However, U.S. demand isn’t dropping. Ponies still like their oats and the grain finds its way into breakfast foods, muffins and snacks.
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Western Canada, which has a good climate for growing oats, is the closest area of production to fill that demand.
While the U.S. in 1996 seeded its smallest oats crop since the Civil War, Canadian farmers seeded the biggest crop in decades, up almost 50 percent from 1995.
Exports to U.S. up
Canadian production is expected to hit about 4.57 million tonnes. Domestic use is expected to rise a little, but the big increase will likely come from exports to the U.S., up about a third to 1.4 million tonnes.
That would still leave stocks at the end of 1996-97 crop year at 1.21 million tonnes, compared to 420,000 tonnes at the end of 1995-96 and about 40 percent more than the five-year average.
The U.S. export target would have been a record. Randy Strychar, owner of Statcom Publishing which prints an oats newsletter, figures Canada will be hard-pressed to hit the record with its late harvest and transportation problems.
Meanwhile, other major oats exporters in the world, Sweden and Finland, had good crops and are already exporting to the U.S. About 110,000 tonnes have moved across the Atlantic and the Scandinavians are using European Union export subsidies of $38 U.S. a tonne.
Strychar said this subsidized trade was expected. The EU said it wants to keep subsidies under reign, and Strychar believes prices could hold steady to slightly lower through this crop year.
But a meltdown in price could happen next year if two things happen.
- Canadian farmers hoping for a price increase hold back grain and starve the export pipeline to the U.S., causing higher than expected ending stocks.
- Good production contract prices in 1997 generate big oats acres next spring.
That would turn the market bearish on oats and the price could head below $1 (U.S.) a bushel.
