Oat market running risk of excess supply in 2020

The oat market once again appears headed for a burdensome supply this fall, as strong prices through much of the winter have led growers to pencil more oats into their seeding plans for 2020.

New crop prices have started dropping in recent weeks, but many growers on the eastern side of the Canadian Prairies signed forward contracts earlier this winter  — some of them exceeding $3.50/bushel. As a result, acres in Western Canada are expected to rise by another nine percent, according to Agriculture and Agri-Food Canada’s latest monthly outlook. U.S. acres are also expected to increase by three percent, according to the USDA’s latest estimate.

Oat acres already rose 18 percent last year — the largest oat area since 2009, according to Statistics Canada, but weather kept the supply situation in check.

“Oats have been known to have the boom and bust cycle quite consistently, but our quality and drought concerns last year and the year before have prevented us from seeing the bust cycle,” notes Lorne Boundy, merchandiser with Paterson Grain, in the interview below. “Given the amount of hype around oats, the amount of intended oat acres, the reality of the situation is if we have a crop — an average to above average crop — we’re going to have a burdensome supply.”

After last year’s drought and quality challenges, he says buyers came out with new crop bids about 25 cents higher than historical values to attract acres.

“Last harvest was miserable and getting growers to forward sell at a historical number wasn’t working,” says Boundy. “So that’s why we saw the oat price come out about 25 cents above the historical value, just to get the job done and get some harvest coverage on the books.”

Millers are also pushing for more of those acres to be harvested without the use of glyphosate for weed control prior to taking the crop off.

“It’s not because the science is saying it’s wrong. It’s because consumers are demanding a product that hasn’t been sprayed, specifically with glyphosate,” says Boundy, noting there’s more demand than supply of “glyphosate-free” oats.

Listen to Lorne Boundy’s outlook for the oat market in 2020, recorded at the CropConnect Conference in Winnipeg last month:

Related: $20 million gluten-free oat plant to be built in Saskatchewan

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