(Resource News International) — Canada may have a harder time selling oats into the U.S. this year, as the country is expected to import more Scandinavian supplies.
Dennis Galbraith of Can-Oat Milling at Portage la Prairie, Man. said one vessel containing oats from the Scandinavian countries of northwestern Europe recently unloaded at the U.S. Gulf, the first such shipment in a number of years. He expected at least two or three more shipments to take place going forward.
Declines in ocean freight rates, while rail rates have stayed high, were behind the Scandinavian oats imports, he said.
“Rail rates just aren’t competitive anymore compared to ocean freight,” said Ryan McKnight of Linear Grain at Carman, Man. At current prices, he noted, it’s cheaper to ship oats across the ocean from Finland to Houston, Tex. (over 8,000 km) than it is to move by rail from Winnipeg to Thunder Bay, Ont. (715 km).
The Scandinavian oats were destined for the southern U.S. horse feed markets, McKnight said. After arriving in Houston the oats are to be trucked out to various feed mills in the area, but will only go so far before the truck rates make them uncompetitive with Canadian trucked oats, he said.
While the Scandinavian oats shouldn’t be a major factor in the milling market, McKnight noted about 50 per cent of Canada’s oats exports are for the U.S. feed market. From a price perspective, McKnight expected the Scandinavian oats would keep basis levels in Western Canada weaker than they otherwise might be.
Galbraith said the Scandinavian oats should conceivably cut into Canadian export opportunities. However, he said the high rail rates would limit Canadian exports regardless of how much Scandinavian oats were coming into the U.S.
Galbraith also noted that the U.S. horse market has been feeding less oats in recent years in favour of alternatives such as corn. As a result, he questioned whether or not the Scandinavian oats would be displacing Canadian oats or U.S. corn.
Canadian farmers grew 4.321 million tonnes of oats in 2008-09, down from 4.696 million the previous year, according to government data. However, total supplies were actually up on the year due to large carry-in stocks.
Coarse grains analyst Chris Beckman, with Agriculture and Agri-Food Canada’s market analysis division in Winnipeg, couldn’t speak specifically to the U.S. Scandinavian oats imports. However, he was expecting lower Canadian oats exports overall this year due to reduced demand from the U.S. Beckman said U.S. customers had pre-bought and built up their supplies.
AAFC currently calls for total Canadian oats exports in 2008-09 of 2.450 million tonnes, which would compare with 2.804 million in 2007-08. Carryout is expected to increase once again to 1.2 million, from 975,000 tonnes.
However, “the year is young yet, so everything is subject to a lot of revision,” said Beckman.