Oats posts harvest low, movement frees bin space

Most Prairie oat growers appear to be relatively satisfied as they grind their way through a dull oat market.

Prices might not be good, but the crop has been moving and yields have been making up for soft prices.

“People are buying it and using it,” said Neil Townsend of FarmLink Marketing.

“It’s providing cash and movement opportunities.”

Oats is an odd duck this year, surprising the markets at harvest time with much bigger than expected yields. That weighed on prices. Millers’ early requirements were covered by forward contracting done long before harvest.

But the crop has found buyers to take it so far, Townsend said, allowing farmers to move the bulky crop off-farm and leave bin space for the traditionally first marketed crop, canola, on the hope for a rally later in the winter.

“Some of the (oat) yields were just phenomenal,” said Townsend.

According to OatInformation estimates, oats strongly sold off from August until mid-September, but then began a climb back up to better levels. 

From an average Western Canadian bid of about $2.70 per bushel in early August, the price fell to just above $2 in mid-September, but then recovered.

Randy Strychar of OatInformation said he saw “neither millers nor growers chasing values,” but that some slight price gains on the Chicago oats futures contract could still come.

“We believe there may be further upside for oat prices (but) Canadian cash oat fundamentals do not support a rally above contract highs. Suppliers are simply more than adequate deep into 2017-18,” said Strychar in his Oct. 22 Weekend oat commentary.

Oat acres have suffered as the horsefeed market has slipped. Feed formulators got creative in recent years, blending untraditional feed sources to create composites that allow feed companies and buyers to avoid having to buy oats.

At the same time the North American human consumption market has been growing only slowly.

The Chinese human consumption market has been growing rapidly, but Canada is currently cut off from that market and can only watch competitor Australia serve it.

That has made Australia a growing world oats exporter, rising from being responsible for about only one percent of global exports to 12 percent today. 

Most global “exports” are still sales of Canadian oats to U.S. millers and processors. In recent years, with the slumping horsefeed interest, Scandinavian exports to the southeastern U.S. have also slumped, removing a one-time regular competitor.

Townsend said there isn’t much to perk up the oats market right now, but growers will be happy as long as they can keep moving the crop.

The best bet for the best prices will be late in the winter and early spring, if buyers feel they need to “buy” acres, Townsend said.

If yields are closer to average next year, a smaller acreage would worry millers and processors, who realize farmers are becoming less enamoured of the crop all the time.

They’ll likely bid-up oats prices then, just to cover some of their needs beyond usual levels.

“It’s a risk-off move for the buyer to get some acres in the ground and sure there’s a crop next year,” said Townsend.

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