Patience is the best remedy for every trouble, according to Titus Marcus Plautus.
The ancient Roman dramatist could well have been writing a 2009-10 market outlook for oats when he penned those words more than 20 centuries ago.
Prairie oat growers have their share of troubles right now, with reduced demand from U.S. millers, increased competition from Scandinavian oats and a continuing battle to harvest the crop in good quality.
However, market watchers say those troubles will be remedied eventually.
“If a grower can be patient, he’s going to get rewarded down the road,” said Randy Strychar of Ag Commodity Research.
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“The problem is you’re looking eight to 10 months down the road.”
In the meantime, there is a usually a seasonal price jump between December and February so producers should watch for that, he said.
Errol Anderson of ProMarket Wire expects to see a gradual improvement in oat prices early next year as buyers inevitably get back into the market.
“As you get some demand, prices will jump and they can jump by 10 percent quite easily,” he said.
Prices are $1.80 to $2 a bushel delivered to mills, about 25 cents below the three to five year average.
“There’s no reason the market can’t move to $2 to $2.25 and maybe even higher,” Anderson said.
One of the biggest anchors on the oat market is the record 300,000 tonnes of inventory stored in U.S. elevators.
It originated in 2007 and 2008 when a U.S. company bought large volumes of oats, paying record prices. That was great for Canadian growers at the time, but as a result there are sizable stocks of oats in the U.S.
“Demand is dragging right now and that really puts a lid on the market,” Strychar said.
Another negative factor is increased supplies of Scandinavian oats. Strychar said the United States might import 100,000 to 150,000 tonnes from Scandinavia in the coming year, up from 25,000 a year go.
What he described as the “final nail in the coffin” is a 10 to 15 percent drop in demand from U.S. millers, reflecting a decline of about 10 percent in consumption of oat-based breakfast cereals and snack bars.
Anderson said oat acres will decline significantly in 2010 if prices don’t pick up through the winter, which could trigger a surge in prices a year from now.
Agriculture Canada’s Oct. 8 market report indicated 2009 production was 2.9 million tonnes, down from 4.3 million the previous year. Total supply was pegged at 4.4 million tonnes (5.2 million).
Exports are forecast to be two million tonnes (2.4 million) and year-end carryout stocks of 1.1 million (1.5 million).
Chris Beckman, coarse grain analyst for Agriculture Canada, said harvest problems could result in quality problems, which will in turn create premiums for top quality product.
“I think there could be some pretty decent opportunities if you have good quality milling oats,” he said.
Another good sign is that oat prices at the Chicago Board of Trade have risen independently of corn in recent weeks, which is more reflective of oat fundamentals.
For example, Chicago oats were $2.55 US a bushel Oct. 30, up from $2.50 a week earlier.
“That suggests some underlying strength in oats,” Beckman said.
The value of the Canadian dollar will also be a big factor in the oat market in the coming year, he added.
