Farmers may want to sell some of their oats straight off the combine as prices are relatively sweet, compared to abysmal feed barley prices.
After bottoming out at averages around $1.40 per bushel in July, oats were trading last week around $1.65 per bu., delivered to the elevator, according to an analyst with Statcom.
“But I also think they need to watch the markets pretty closely this year, because it is a tighter supply and demand situation,” said Randy Strychar.
“It’s the kind of year where we have more upside potential than down, I think.”
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Analysts believe North American commercial stocks are low enough and United States demand is strong enough to keep oat prices from going much below current levels.
Duncan McKinnon, who follows coarse grains for Agriculture Canada, said he expects Canadian oat supplies to drop by eight percent this year.
Farmers are expected to take off 22 percent fewer oats this fall. They planted fewer because of last year’s poor prices and yields were burned by hot, dry weather.
John Duvenaud, publisher of Wild Oats markets newsletter, said some farmers in southern Manitoba were looking at stands of 90 to 100 bu. an acre earlier in the summer. These fields are now coming off between 60 and 80 bu.
But total supplies may only decline by eight percent because of leftovers from last year’s crop, the biggest one in 20 years.
McKinnon pegs 1996-97 end stocks at 900,000 tonnes, while Strychar estimates them at 725,000 tonnes.
Strychar expects fewer farmers to feed oats to livestock this year because of the crop’s premium to feed barley.
He also expects exports to the U.S. to be down slightly because farmers there boosted production by about 475,000 tonnes and have been selling it off the combine.
This increase has been holding down U.S. oat prices, which are tracked by Canadian prices.
Strychar said higher U.S. production could mean lower demand from U.S. mills for Canadian milling oats for the next several months. Also, Scandinavian oat producers will likely ship as many oats to the U.S. as they did last year.
But analysts say domestic milling consumption will rise by about 50,000 tonnes as the new Can-Oat mill comes on line at Saskatoon.
By the end of the crop year, Strychar expects closing stocks of 500,000 tonnes, well below the 10-year average of 700,000 tonnes.
“It’s enough for us to function with, but any harvesting problems this fall could really tighten prices up,” he said.
Because of adequate supplies in North America, oats will be priced as a feed grain, Duvenaud explained.
“For its value to increase dramatically, we’d have to have the price of feed grain increase, which might well happen,” he said.
Few ups and downs
McKinnon expects prices to be in the $150 to $180 per tonne range for No. 3 oats, in-store Minneapolis. Last year, Agriculture Canada said the average price was $174 per tonne.
“I don’t think we have a tremendous amount of downside right now,” said Strychar. “There’s just not enough oats to really flood the market, to drive prices down to $1.20 a bushel.
“On the other hand, I don’t think you’ll see a 30 cent run-up either, unless there’s a problem with feed grains worldwide.”
Analysts are recommending farmers sell 20 to 30 percent of their crop now, and watch for rallies to make further sales.
Duvenaud said he’s treating current prices as a floor and is looking for them to gradually work their way higher through the winter.
Added Strychar: “I just really wouldn’t want to be dumping the crop right now.”
