BRANDON – A lot of farmers were hanging around oat millers’ and buyers’
booths at Manitoba Ag Days, lured by the promise of continuing good
prices for this year’s star crop.
The buyers and millers were keen to talk with the producers, hoping to
get their hands on whatever milling quality oats the farmers had left
and offering sales contracts for the 2002-03 crop.
This is a good situation for producers, said Bruce Roskens of Quaker
Oats. They shouldn’t assume it will last forever.
Read Also
China’s grain imports have slumped big-time
China purchased just over 20 million tonnes of wheat, corn, barley and sorghum last year, that is well below the 60 million tonnes purchased in 2021-22.
“You’re in the driver’s seat now,” said Roskens in a market outlook
talk. “Don’t give up that seat.”
Roskens urged producers to contract at least half of the crop they plan
to seed this spring, and not get too greedy.
“You’ve got some options to lock in not $4 (per bushel) or not even $3,
but you’ve got some options to lock in what you wanted not even a year
ago,” said Roskens.
This could be a year of wild price swings, he said. Stocks are so low
that bad weather could make prices surge as they did this year. But a
good crop could also take much of the air out of the market. Prices
won’t drop to the depths they hit a year ago, but they will back off
from this winter’s spike if there’s a good crop this summer, he said.
Oats prices have soared this winter because of a string of oats quality
problems over the past two years, Roskens said.
Production of oats in general hasn’t been badly affected, except for
milling oats.
“You are looking at an accumulation of two years with world oat quality
problems,” said Roskens.
In 2000, the Manitoba crop was seriously injured by rain at harvest
causing sprout problems.
In 2001, drought in Alberta and Saskatchewan and a combination of bad
conditions in August in Manitoba severely hurt the western Canadian
crop, which supplies most of North America’s milling oats.
Last summer Sweden and Finland also had disappointing crops.
That combination of factors caused oats to radically change its market
nature, from being priced as a feed grain to a food, and trading
independently of corn.
Roskens said people are estimating an increase in oats acres this
spring of between five and 30 percent as farmers try to take advantage
of the good price outlook.
Western Canadian farmers and prairie weather will determine what
happens to the market, Roskens said.
If there is an increase of 10 percent in prairie seeded acreage in
oats, and the weather allows an average 64-bushels-per-acre crop across
Western Canada, exportable stocks will balloon by 47 percent. If
acreage jumped by 25 percent, then exportable stocks would double.
That would swell supplies and push down prices, which Roskens hopes
doesn’t happen. Even though his company would be able to buy cheap oats
for one year, the price drop would eliminate a lot of oats acreage for
2003, causing another problem year.
But Roskens thinks the acreage increase will be on the low end, between
five and 10 percent.
North and South Dakota farmers won’t be rushing to seed oats because
government subsidies aren’t paying them to do that. Loan deficiency
payments, which set a lucrative base price for some commodities, will
favour the big U.S. midwest crops.
“It still says to plant corn and beans in North Dakota,” said Roskens.
“And that’s what they’re going to do if they’re smart. They’re not
going to plant more oats.”
Some more oats may come out of Australia, but not enough to
significantly affect world supply. South America certainly won’t be
moving into the oats market.
The lingering dry conditions across much of the Prairies and in parts
of the United States may produce market rallies that encourage farmers
to grow barley, wheat and oilseeds.
That’s why oats prices will react quickly to any problems in the coming
year.
“If we were to have a drought, if Finland and Sweden were to have a
problem, then we’re right back up again at the levels markets are at
today,” said Roskens.
But to guarantee themselves a reasonable price and to take some of the
gamble out of their marketing for the 2002-03 oats crop, producers
should begin locking in some of the prices on offer.
If they don’t, farmers could find they’ve given away prices they were
praying for only a year ago.
“I’d be locking in at least 50 percent with that,” he said.
