Oat prices firm though U.S. demand to fall

(Resource News International) — U.S. demand for Canadian oats will be lower in the 2008-09 crop year; however, prices are expected to generally resist downward pressure due to soaring U.S. corn values, according to industry sources.

Oat production in Canada for 2008-09 was pegged at 3.65 million tonnes by Agriculture and Agri-Food Canada on May 27, down significantly from the 2007-08 production level of 4.69 million tonnes. High 2007-08 carry-out levels and high 2008-09 yields will only partially offset the lower production figure.

Also, analysts say production could be even lower than 3.65 million tonnes in 2008-09. An updated seeded area report released June 24 by Statistics Canada showed only 4.382 million acres were seeded to oats this spring, below the 4.485 million acres producers said they intended to seed in an earlier Statistics Canada acreage report.

Exports are forecast to total 2.15 million tonnes, down from the record 2007-08 amount of 2.40 million tonnes.

The expected decline in demand for the upcoming crop year is tied to the active purchasing that was done in 2007-08 by many oat users.

“The U.S. has been buying a lot of oats from this current crop to be used next year, so we’re expecting demand to be down slightly from that market. They are storing oats right now and should be well covered until about December, 2008,” said Real Tetrault, president of Emerson Milling at Emerson, Man., at the U.S. border about 100 km south of Winnipeg.

Firm interest is expected from other existing markets for Canadian oats, such as Mexico and South America, but they are small in comparison to the U.S. market, he said.

Yet despite the anticipated decrease in demand, oat prices are expected to remain firm as they are pulled higher by strong U.S. corn values.

“Right now the U.S. corn crop is having a lot of difficulty so oats may stay fairly strong relative to corn prices. Come January I think we may he hovering around that $4 per bushel level, give or take 20 cents” Tetrault said.

Oat values may also find support if at some point corn prices itself out of certain feed markets.

“If corn values continue to inch higher, eventually a price level will presumably be reached at which oats begin moving into feed channels other than just the equestrian market,” said Dennis Galbraith of Can-Oat Milling at Portage la Prairie, Man.

Looking ahead, Al Loyns, past president of the Prairie Oat Growers’ Association (POGA), said the oat producers’ group has been working with the University of Manitoba on a project designed to test the feasibility of using hulless oats in the hog market as a feed alternative to corn.

He said the creation of another market for oats would be a valuable contribution to all Prairie oat farmers but especially for those in Manitoba and eastern Saskatchewan, as Alberta already has its own niche of sorts. Favourable weather in that province makes its oats ideal for the U.S. pony oat market.

“POGA is experimenting with the feasibility of hulless oats as an alternative feed and it could be a significant new market, but not this year,” Loyns said.

Soaring U.S. corn prices were certainly serving to improve the economic feasibility of hulless oat feed, he added.

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