Oats benefit from costly corn

Growth in equine sales | Campaign to entice horse owners away from corn-based feed is well-timed

Oats have made a stunning recovery in the U.S. horse feed market, with demand increasing by 72 percent from last year.

It’s dramatic proof that the crucial market can be won back, even if this year’s victory is not the result of committed oat popularity with the equine set.

“It’s about corn being expensive,” said Ag Commodity Research oat analyst Randy Strychar.

Strychar said he expects oats to win more sales to U.S. horse feed manufacturers if cash market prices in horse areas remain close to even money per tonne for oats versus corn.

“We’re going to see continued incremental sales to the equine market.”

The dramatic decline of oats used in horse feed rations has worried Canadian oat growers because it is an important secondary market for the crop after the all-important milling market that uses oats for Cheerios, Quaker Oats and granola bars.

Horse owners will pay top dollar for quality feed grains so it is not a heavily discounted market, unlike feed wheat markets.

The oat industry has mounted an aggressive campaign to win back the U.S. horse feed market, which once consumed one million tonnes of imported oats per year. Most of that was Canadian oats.

However, after reaching its peak of nearly 1.1 million tonnes in 1993-94, consumption fell to 500,000 tonnes by the mid-2000s and hit a low of 282,000 tonnes in 2010-11.

Horse feed manufacturers began using corn-based replacements for oats and found cheap ways to mimic the nutritional value of oats. With plenty of cheap corn available, replacing oats was easy.

However, consumption for 2011-12 appears to have reached 500,000 tonnes and should increase in 2012-13 if present market conditions continue, Strychar said.

That’s good news in terms of winning back horse demand, but it’s not for a good reason. Oats is re-gaining buyers not because they suddenly believe oats are much better than corn as horse feed but because corn has become much more expensive.

Oat futures prices have increased 35 percent since the Midwest drought began. That’s a lot, but not compared to the 55 percent increase in the price of corn.

With corn now having a roughly equal per tonne price to oats in crucial horse feed markets such as Kentucky, oats have begun to reassert their superior nutritional value and sales have dramatically in-creased.

Strychar said this is good for the overall price outlook for prairie oat growers because horse feed sales not only help rebuild a mostly lost market but also work down an already low stockpile of oats.

Oat ending stocks for 2012-13 are already near record lows, and the relatively poor price for oats is unlikely to encourage growers to plant much next spring.

That could set up a winter of good prices and a good following year.

“At some point the oat market is going to have to start responding (to the very low stockpiles of oats),” Strychar said.

However, the relatively low price of oats right now is helping re-engage U.S. horse feed buyers and manufacturers with the crop, so it’s perfectly timed for the oat industry’s campaign to regain the market, he said.

Price is forcing buyers to look at the crop again, so the industry can now find receptive eyes and ears for its sales pitch after years of being ignored.

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