Demand for Canadian oats from south of the border will get off to a slow start this fall.
That’s because an estimated half a million tonnes exported to the United States last year is now being held in storage by U.S. millers.
“There will always be steady demand from the U.S., but most millers have filled their demand all the way until January right now,” said market analyst Randy Strychar of OatInsight.
“So there is less demand for nearby positions off the combine.”
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He said millers will look to make purchases for January and beyond.
Strychar estimates that of the record 2.2 million tonnes of oats exported to the U.S. last year, 500,000 to 600,000 tonnes have been stockpiled.
“It’s just sitting in elevators waiting for the right moment to come out,” he said.
“When basis levels in the U.S. start to move up you’ll see it come out, but until they do it will sit in store.”
John Duvenaud of Wild Oats Grain Market Advisory said U.S. buyers bought a lot of oats last summer as farmers cleaned out their bins to take advantage of strong prices.
“So they’ll be buying less this fall from Canada unless they want to restock,” he said, adding he thinks that’s unlikely.
Those buffer stocks are one of the reasons oat exports are expected to decline to 2.5 million tonnes in 2008-09, down by 12 percent from 2.8 million last year.
According to Agriculture Canada, oat production in 2008 was 4.1 million tonnes, down 14 percent from the previous year’s 4.7 million tonne crop.
When opening stocks of 900,000 tonnes are taken into account, total supply for 2008-09 is estimated at 5.1 million tonnes. With exports of 2.5 million tonnes and domestic consumption at 1.7 million, ending stocks July 31, 2009, are forecast to be eight percent higher at 975,000 tonnes.
Agriculture Canada expects prices to be five to 10 percent higher this year.
Strychar said if deliveries are moderate this fall, the crop will find a home without affecting the market. However, heavier than expected deliveries could lower prices.
Prices for milling oats delivered to the mill off the combine were $2.90 to $3 a bushel in southern Manitoba and have now slipped back slightly to around $2.70.
The average 2007-08 price for oats delivered to Can-Oat Milling in Portage la Prairie, Man., was $3.17 a bu., ranging from a high of $4.12 to a low of $2.44. That’s well above the five-year average of $2.44.
Strychar said while the market will be volatile, he can’t see prices approaching last summer’s record highs. Instead they will probably reach $3 to $3.50 a bu., still a good price by historical standards.
Chris Beckman, market analyst with Agriculture Canada, said tighter Canadian stocks, low global supplies of coarse grain and a strong U.S. corn market should work to support prices in 2009-10.
Agriculture Canada’s oat price forecast is based on the Chicago Board of Trade’s nearby futures price. For 2008-09 it’s projecting an average price of $245 to $265 a tonne, up five to 10 percent from last year’s $233.
Duvenaud said his advice to oat growers is to be patient.
“Let the first big slug of harvest selling go through, then after freeze-up look at moving it,” he said.
