February 28 – Status Quo Prevails for Oats Prices?

Increasing demand for oats is motivating farmers to work for higher yields.

But acres shouldn’t change much as over the next two years, oats prices could trade sideways.

Increasing demand for oats is motivating farmers to work for higher yields.

But acres shouldn’t change much as over the next two years, oats prices could trade sideways. 

As more consumers are opting for the healthy snack bar options, and as Western breakfast preferences are increasing in popularity across the globe, it seems like we should be optimistic about more demand for oats. 

More effort is being put into gaining access to the Chinese oats market, as their shifting preference for oats based products, such as breakfast bars, means Canada could capitalize on increasing imports.

Their imports are projected at a 35% increase over the next five years, so this access could be a key importer of their Canada’s oats crop.

However, we’ve mentioned at the beginning of February the challenges of Canadian oats making their way into China

As such, the forecasts from some of the best analysts in the oats prices game suggest that farmers should not expect to big of a range in the next two years.

Specifically, expectations are for oats prices to remain the same over the next 24 months, averaging close to $3 CAD / bushel in Saskatchewan, and up to $3.25 in Manitoba.

And the market is content with these oats prices for now. We can talk about the increasing demand and the possibility of access to the Chinese market til the cows come home but China is pretty swarthy when it comes to international diplomacy.

Further, we know that China has an open trade relationship with Australia for its oats, so do they really need Canadian oats?

If anything, a rally in oats prices will be the result of weather issues in the next 5 months, similar to the slight run-up we saw in July.

That being said, we have seen some healthy deals on the FarmLead Marketplace for FOB farm deals around Yorkton, SK (P.S. it’s not Grain Millers that’s buying them).

For oats prices being bid across the FarmLead Marketplace, there are deals to be made in Alberta, Saskatchewan, and Manitoba.

Check out all the bids here and start a conversation with any of the credit-verified buyers. Share your specs, where you’re located, and how much you’re looking to move

browse-oats-prices-farmlead

Oat prices to stay put over next 24 months

Manitoba farmers could be poised to capitalize on a growing global demand for oats — if Canada gains access to the Chinese market.

Speaking to producers at CropConnect in Winnipeg last week, market analyst Randy Strychar said that changing consumption patterns at home and abroad are presenting new opportunities for Prairie oat growers, particularly those in Manitoba where growing conditions are conducive to high levels of beta-glucan.

“The biggest problem we’re having right now getting oats into the Chinese market is that the protocol is not in place for us to put oats in there,” said Strychar. “We can put seed oats in there, but we can’t put oats for human consumption in.”

Concerted efforts over the last 24 months have put Canadian oats on the Chinese trade agenda.

“(Growers) did send a delegation over there this summer and it is now on the agenda, (but) at what pace the Chinese move on that I don’t know,” he said, adding that Australia is currently the largest exporter of PRC-bound oats.

But with Chinese oat imports predicted to grow by as much as 35 percent over the next five years, the owner of the Vancouver-based oatinformation.com said Canada can still take advantage of the growing market if access is secured.

“The middle class is emerging as a huge buyer of… western-based products, specifically breakfast cereals and snack bars,” Strychar said. “The diets are changing for the younger generation — the traditional Chinese breakfast is being replaced as the economy changes.”

However, changes in North American breakfast preferences are also impacting demand. As consumers seek healthy breakfast foods with less sugar content, oats are becoming a favored ingredient, he said.

“Breakfast cereals and snack bars have a fairly high concentration of oats and those two industries are showing solid growth,” he said. “There are a lot of positives for the oat industry moving forward and most of it has to do with the breakfast cereals and the snack bars.”

Doyle Penner of the Manitoba Oat Growers Association agrees that there is room for growth in the industry.

“I absolutely do believe there is room to grow in the Red River Valley, we are a prime growing area, we are good with our beta glucan counts and there is a great opportunity,” he said. “And we’re close to the border, so as far as our movement south, we’re in a prime position for it… the opportunity for growth is definitely there.”

According to Statistics Canada, total Canadian oat acres rose 13.6 percent from 2016 to 3.2 million acres in 2017. In Saskatchewan, farmers planted 1.7 million acres, an increase of more than 20 percent, while Alberta’s acreage decreased about 4.2 percent to 690,000 acres in 2017.

Manitoba saw one of its biggest oat crops in 2017. Manitoba Agricultural Services Corporation estimated there were 461,804 insured oat acres in the province, an increase of 32 percent from the previous year.

Gone are the days when oats were seen as an also-ran crop.

“It’s pretty prominent now,” said Penner. “With the way we have to look at our inputs and everything… it’s a calculated thing that we’re going into when we plan our acres and ultimately, we’re basing it on the price that we’re going to be selling it for and we’re all trying to make a living at it.”

However, Strychar noted it’s not increasing acres driving oat production in Manitoba — it’s yield.

“They are not just throwing it in the ground, people historically viewed oats as one of those six major crops that they didn’t pay a lot of attention to, that’s not the case,” he said. “More and more farmers are paying more money to get a better crop.”

But just because demand is rising, it doesn’t mean that prices are rising with the same gusto.

“It could be 24 months where we struggle with averaging $3 (cash price), maybe $2.75, $3.25 in Manitoba,” he said. “If you’re looking for $3.50 in Manitoba, I don’t think you’re going to see it… we’re going to have a struggle for about 24 months.”

H/T: Manitoba Cooperator
About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.