It’s time for farmers to move oats out of the bin and sell them, says Randy Strychar of Statcom Ltd.
“They should seriously be looking at moving as much as they can,” Strychar said.”This is not a good time to be hanging on.”
Most oats buyers have found enough supply to meet most of their needs for this year, so there won’t be any panic buying.
Dennis Galbraith, procurement manager for Can-Oat Milling in Portage La Prairie, Man., said his company has not had trouble finding oats.
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Strychar said that as the new crop year approaches, buyers will expect more production, which will further reduce price expectations. Buyers don’t expect next year’s crop to be as small as this year’s.
“If there’s a 10 percent decline in acres and normal abandonment, we’re still going to end up with a 26 percent production increase,” Strychar said.
He expects Chicago Board of Trade oats futures to trade between $1.90 US and $2.10 in the last few months of the 2002-03 crop year, with more of a downside than an upside.
Oats prices have been stable recently, which does not encourage buyers to bid higher.
“If this market stays in balance, the bias is always to the downside, because you have to feed the bulls,” Strychar said.
“If you don’t, (prices) just drift and drift.”
Processors who still need to buy 2002-03 oats will buy grudgingly and cautiously, trying to “squeeze by” this year’s higher prices into the more-affordable 2003-04 market.
Strychar also recommends that growers now sell 15 to 20 percent of the crop they intend to seed this spring. Present prices for 2003-04 won’t last if a good crop is produced.
But farmers probably won’t contract much production this year, Strychar said. Because of drought and harvest problems, many farmers weren’t able to meet contracts they signed last year and had to buy their way out. They may be gun-shy about signing another contract.
Strychar said growers shouldn’t ignore contracts, because they offer attractive returns with only reasonable risk.
Right now some millers are offering $2.40 per bushel for new crop oats, a price that won’t be available in the fall cash market if farmers hold back 2002-03 oats and if there is an average crop this summer.
“It’ll be more like $1.80,” Strychar said.
Farmers have had two terrible years, but have benefited from contracts most years.
He estimates that it will take three to five years for farmers to get over their trauma of the past two years and return to forward contracting.
Strychar said farmers sometimes prefer to take a risk in the cash market rather than minimize risk with contracting.
“Farmers are bigger risk takers than traders, and they’re also far more optimistic,” he said.
