BRANDON – The next couple of weeks will be critical for the oats market, determining whether prices will break out of the pattern of the last couple of months.
Dennis Galbraith, manager of procurement for Can-Oat Milling in Portage la Prairie, Man., told farmers at Manitoba Ag Days in Brandon Jan. 15 that buyers and end users, mostly in the United States, are saying they have enough supply.
However, that might be a brave face, he added.
“I think the next three or four weeks are going to be a crunch time,” he said.
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He thinks the major American buyers have enough supply for the time being, but will need to buy more to cover their needs for the rest of the crop year.
Analysts expect Canada will export about 725,000 tonnes of whole oats this year, which is down from more than one million in 2001-02 because of a small crop and quality problems.
Scandinavia harvested a large, quality crop last fall. Its exports are expected to total about one million tonnes, up from a little less than 700,000 tonnes the year before.
“The question is, who are they (the Americans) going to buy from?” Galbraith said.
The price for Canadian and Scandinavian oats is about the same for American buyers, but the Scandinavians have a slight edge in quality and Galbraith thinks that will give them the business, resulting in a fairly flat market in Canada for at least several months.
“But it takes only one guy in the States to get into a panic and change that all around. One guy panics and it will drive everybody up.”
Weather is one factor that could make a difference in the level of buying for the rest of the year.
People tend to eat more oats porridge when it is cold, and demand could drop if El Nino leads to a mild winter in the U.S.
More generally, the long-term demand trend for human food oats has slowed since the oats bran boom of the 1980s and early 1990s.
Demand is now increasing in North America by about three percent a year, about the same as the population growth rate, he said.
Sales of ready-to-eat breakfast cereals have dropped about four percent because rushed consumers are forgoing the traditional sit-down breakfast. However, the same trend is increasing the demand for oats-based granola bars by about five percent a year, he said.
Looking at the outlook for 2003, Galbraith said he expects Canadian oats acres to decline by about 10 percent from 2002.
While only 3.2 million acres were harvested due to drought and greenfeed demand, 5.9 million acres were seeded last year, a large increase over 2001.
“Frankly, I want to see acres decline,” he said.
“That’s because 5.9 million acres last year would have made for way too many oats.”
He would prefer a more stable acreage and price.
“If you have people getting in and out and in and out and acres jumping, it just gets too volatile.”
While seeded acreage should be down, production could be up if the weather moderates and yields return to the average, Galbraith said.
If that happens, oats prices would return to their historical relationship with corn. Normally, oats prices reflect their feed value relative to corn, but in the last two years, because of production problems in Canada, the crop’s human food value has come to the fore.
Galbraith said the trend is that oats prices are about 60 percent of corn prices, due to the lack of nutrition in the oat hull.
