Prospects for oat markets are as gloomy as for other major grains.
“There’s not a lot of upside room for oat prices, at least not in the next six months,” said Duncan McKinnon, coarse grains analyst with Agriculture Canada.
Cash prices for oats have been trading within a narrow five-cent per bushel range for ages, said analyst Randy Strychar of Statcom Ltd.
And barring major weather problems in South America, or next spring in more northern climes, Strychar foresees few changes.
“There’s just been no bullish news in this market at all,” he said.
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This summer, United States farmers produced only 2.1 million tonnes of oats, the lowest since the country starting collecting data in 1866.
Canadian farmers also decreased oat production by eight percent from last year to 3.7 million tonnes.
But even this decrease wasn’t enough to rev up the oat market.
That’s because the feed grain complex is in the tank, explained Strychar.
Corn prices are under great pressure because of large stocks, said McKinnon, and oat prices track corn prices.
Large U.S. millers, who buy most of the Canadian oats exported south, have storage bins packed full of bargain-priced wheat and corn, and aren’t stocking up on oats.
As of Oct. 17, Canada had exported 395,000 tonnes in this crop year, down from 478,000 tonnes in the same
period last year, noted McKinnon.
Strychar expects Canadian exports to reach 1.1 million tonnes this year, down 13 percent from last year.
By the end of this crop year, he said, Canadian oat ending stocks will be the highest in two decades.
Some see European oat subsidies as the culprit. But McKinnon said the connection is not that straightforward.
Subsidized Scandinavian oats move into southern U.S. feed markets and Canadian oats move into northern U.S. milling markets.
In the 1990s, it’s been rare for either to cross into the other’s territory, said Strychar.
While he does not agree with European Union subsidies, he believes Scandinavian oats don’t steal Canadian market share. In fact, he said, the subsidized oats “buy new demand” in the southern U.S.
If subsidized oats were not available, and prices rose, Canadian oats still probably wouldn’t move into the southern U.S. Rather, oats would be dropped from feed rations, or U.S. farmers would respond to the higher prices and grow them, he said.
At the Gulf of Mexico, corn is trading for $96 (U.S.) per tonne, compared to $98 per tonne for landed European oats.
Further inland, corn gets cheaper but oats get more expensive.
Strychar expects up to 650,000 tonnes of Scandinavian oats to move into the southern U.S. this year, up 200,000 tonnes from last year.
Street prices for prairie farmers are $1.20 to $1.30 per bushel, said Strychar.
Last year, forward contracts ran $1.60 to $2 per bushel.
Canadian line companies have started forward contracting for next year at prices around $1.80 per bushel.
Producers who are confident of high yields can lock in profits at this level. Based on prices, some people predict farmers may plant 20 to 25 percent fewer acres of oats next year.
But Strychar thinks production won’t fall much in the key export growing area of Manitoba and eastern Saskatchewan.