Today’s insight was going to be a dive into oat prices across North America.
But a strange story emerged when evaluating trends and price expectations for the U.S. oat markets.
The Des Moines released a story in early October about the state of Iowa’s agriculture. The focus was on the buying behavior of oats by the world’s largest cereal production facility.
When I read this story about Quaker Oats, my eyes popped.
When I read it a second time, I shook my head in disbelief.
Then, when I read how this crazy story affected Iowa oat farmers like Earl Canfield, I almost wanted to scream.
Here’s the incredible story about Iowa oat production that has me fired up on Thursday.
Quaker Oats Doesn’t Buy from Iowa Oat Farmers?
This story about Iowa oat farmers made it almost impossible to focus on the broader macroeconomic story about the North American oats market.
Cedar Rapids, Iowa is home to the world’s largest cereal production facility, owned by Quaker Oats.
They purchase oats all across North America as they seek a specific level of quality and quantity to fit their needs for production.
The strange part? This Iowa-based facility doesn’t purchase any grain from oat farmers – wait for it – in Iowa.
The reason is two-fold.
First, there is a total lack of local markets that make it possible to sell oats to nearby buyers. The state trails most of its neighbors in oat production.
Second, there is a perception that Iowa oats lag in quality compared to production on Canadian farms.
Both of these factors are surprising. There was a time that Iowa was the largest oats producer in America. In 1989, the state led the nation in oats production. Today, Iowa sits fifth in oat production. Soybeans and corn now comprize more than 80% of the state’s total crop.
Further, farmers are stuck in a position where they know they can sell corn and soybeans at the local elevator to a buyer as a last resort. So long as the ethanol mandate remains in place, farmers will find a place for their corn.
But corn prices have fallen by about 60% since 2012. Comparably, production costs just aren’t falling at the same rate.
The explains that a study by Iowa State University shows that oats traditionally generate a smaller profit compared to corn and soybeans. But reductions in production costs of oats (particularly on the fertilizer side and herbicide) ticks in about $14 per acre after crop rotation.
Oats also have a variety of environmental benefits that improve soil quality and water retention. They can also serve as an ideal feed substitute or cover crop for some farmers.
The Story of Iowa Oat Farmer Earl Canfield
The Register centers its story on a farmer named Earl Canfield.
About three years ago, he found himself with 3,000 bushels of oats and nowhere to sell them.
He was forced to go out and find buyers. Given the fact that no local market existed, it would take a lot of time and effort to do this. Canfield proceeds to start a small business that sold oats and other feed grains to farmers growing livestock.
Canfield expressed his frustration about the perception of Iowa oat quality in the article, stating that people associate the Corn Belt with–what else–corn.
But he saw oats as a way to diversify his crop, improve his farm’s sustainability, and capitalize on the growing demand for grain that isn’t “genetically modified.”
Given the lack of markets, Canfield is spending hours a day talking to potential customers. He’s stopping at convenience stores and leaving his fliers in community centers.
He brags that he’s become a “price setter” rather than a price taker as demand increases for his livestock grain.
Canfield faces a lot of challenges.
And he spends a lot of his time surmounting those challenges.
A better way exists to market his grain.
The FarmLead Marketplace Creates a Market in Your Backyard
The FarmLead Marketplace is designed to establish markets in places that lack price transparency and connect buyers and sellers of grain in the simplest way possible. This is perfect for Iowa oat farmers like Earl Canfield
Canfield can market his 3,000 bushels of oats on FarmLead.com.
He can do the same with any other crop he grows, including corn and soybeans. Rather than going around the state looking for new buyers, Canfield can post his grain online and lead buyers across the region to his farm and grain.
In addition, Canfield can market his grain and start a dialogue with buyers online that puts his story in the ears of buyers.
Want to make the case that oats or another grain are a valuable feed alternative?
Sign onto FarmLead, post your grain quality, and start marketing it right away.
Quaker Can Find High-Quality Oats
The Des Moines Register explains that Quaker typically just buys from Canadian producers because those farmers have the quantity and quality that the company wants and needs.
But Quaker has probably lacked access to the quality metrics of Iowa oat farmers’ grains.
FarmLead has been acutely aware of this problem, not just in oats, but in a lot of crops.
That’s why FarmLead has built GrainTests.com.
Any farmer can get an independent assessment of their grain very quickly.
Farmers can go to GrainTests.com and get their grain tested in facilities all across the country.
Then, Iowa oat farmers can post their specifications on the FarmLead Marketplace.
Bias against Iowa oats will disappear overnight if some growers show evidence that their crop matches quality of farms in the Dakotas, Minnesota, or Canada.
Oats Market Pull Has Arrived
Finally, the Register explains that a study by the Union of Concerned Scientists revealed that up to 40% of the state’s farmland could diversify to “oats and alfalfa without disrupting markets.” The author explains that we could see that sort of shift without dramatic price changes in alfalfa, oats, corn, or soybeans.
Matthew Liebman, an Illinois State University agronomy professor, told the Register that “farmers need to be assured they could get good market prices and not have to haul the crop vast distances. That market pull is essential.”
But Iowa oat farmers need to know that this market pull has arrived.
On FarmLead, 80% of deals completed are FOB the farm, meaning farmers don’t have to worry about trucking, waiting in elevator lines, or cutting into the additional time not spent back on the farm.
While the argument for more storage and the production of a local market may sound good on paper, the FarmLead Marketplace solves the problem by connecting buyers and sellers across Iowa, Minnesota, and even Canada to make deals for oats and other grains possible.
Sell Anywhere, Anytime and Get the Best Price
On October 5, the Des Moines Register wrote an incredible story.
The world’s largest cereal producer doesn’t buy grain from Iowa oat farmers.
The lack of a local market deters farmers from growing oats. Further, the perceptions of quality and quantity drive Quaker Oats to procure oats from international sources.
But FarmLead’s arrival in the United States can help alleviate this phenomenon.
The FarmLead ecosystem helps buyers obtain all the quality specifications needed through our grain testing network on GrainTests.com.
Farmers can grow crops outside of soybeans and corn and achieve the necessary quality specifications to market their grain.
Finally, the FarmLead Marketplace bypasses the need for local storage facilities and middlemen buyers. Buyers and sellers can go online, negotiate directly for oats, corn, soybeans, or any other of 100-plus agricultural commodity categories on the Marketplace.
We invite Earl Canfield and every other farmer who wants to grow their desired crop to try FarmLead. You’ll get access to more financially verified buyers than anywhere else, and help you cut down on gas for all those sales trips and delivery trips.
Sign up for free now at FarmLead.com.