Some farmers who forward-sold oats this year may be finding themselves in a bit of a bind.
Too much rain hit fields at the wrong time in early September in prime oat-growing areas of Manitoba and parts of eastern Saskatchewan.
Oats in the swath and even some in the stand took on water, causing staining, mildew and sprouting inside the kernel.
“The quality of oats prior to the harvest rains were good to excellent, but the downgrading was fairly substantial after the two weeks of rain,” said Dave Koskie, supervisor of commodity marketing for N.M. Paterson and Sons Ltd.
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Randy Strychar, oat analyst with Statcom Ltd., explained oat millers and pony oat buyers can’t use oats that are more than one percent sprouted.
But as long ago as December 1999, farmers were selling this fall’s oat crop to companies like Can-Oat Milling, Emerson Milling Inc., or to Quaker Oats through Canadian buyer Cargill Ltd.
“The problem is really for the growers: They have to fulfil their contracts they’ve made,” said Strychar, noting about 400,000 to 500,000 tonnes were forward-sold earlier this year.
Farmers who find themselves with poor quality oats will have to buy oats from someone else to fill contracts, or pay an administration fee to get out of their contract.
Strychar has heard about administration fees in the five cents per bushel range, which he considers reasonable.
Large volumes of feed oats will provide challenges to those who have to market them, said Koskie. He explained oats grading under No. 4 CW have a hard time finding homes in the United States market. Strychar said most contracts for oats destined for U.S. buyers call for No. 3 CW, but give growers some flexibility, with premiums for No. 2 CW and discounts for No.4 CW.
But this year, because of the problems with sprouting, buyers will be more cautious about accepting No. 4 CW, Strychar predicted.
Sprouting creates a chemical reaction in oats that can cause the groats to shatter, making processing difficult.
Farmers who have poor quality oats should aggressively stake out local feed markets, said Strychar. They’ll be competing with ample supplies of feed barley and feed wheat, crops which also suffered because of the rain.
It’s unclear how many oats have been excessively damaged by rain, he said, adding buyers should have a better handle on the situation in two to four weeks.
Between 15 to 30 percent of Manitoba’s oat crop may have been damaged, he said, with smaller levels in Saskatchewan. That means new-crop supplies will be down by 160,000 tonnes, at most.
But farmers and the trade brought 500,000 tonnes of 1999 oats into the new crop year, well above the five-year average ending stocks of 340,000 tonnes.
Since commercial use of oats adds up to 725,000 tonnes, Strychar predicts there will be ample oats to go around despite the production problems.
More than 60 percent of Canada’s oat exports come from south-central Manitoba. The region also supplies three Canadian oat mills.
Strychar estimates 20 to 30 percent of the southern Manitoba oat crop was harvested before the damaging rains, which fell between Sept. 1 and 14.
