Shipping delays push oat prices downward

CNS Canada — The backlogged rail system in Canada has slowly started to move for certain commodities, but oats continue to remain on the shipping backburner, pushing prices lower according to some industry participants.

While oat prices at larger companies right now are quite poor, bidding at under $1 per bushel, there are some specialty-type or smaller merchandisers able to offer much better pricing opportunities.

Johnston’s Grain Marketing at Welwyn, Sask. has oat prices this week sitting at $2.30 to $2.80 per bushel for old-crop bids and $2.30 to $2.75 per bushel for new-crop bids.

“We deal with a lot of buyers who are either going mill-direct,” said James Calloway, a broker at Johnston’s. “They’re going by truck to mills in the States. And also we have several buyers who are aggregating in certain locations, especially in Manitoba. We’ve got the competitive bids because we have so many different buyers looking for the product.”

Prices for oats to farmers have remained fairly steady throughout the year, he said, staying within the range of a dime up or down.

“Because we’re going mill-direct, the price is largely based upon whatever that mill is willing to pay,” said Calloway. “It’s not necessarily tied to futures pricing which have gone up by $2 a bushel on futures, but that change never actually trickled down to the producer.”

Calloway added that at times line companies had prices up this year, while they could still get railcars into the U.S. to move oats instead of other commodities such as wheat and canola.

“The transportation system through federal legislation has been biased to either going to the East Coast (via) Thunder Bay and out, or West Coast to Vancouver and Prince Rupert and out,” said Mike Jubinville, president of ProFarmer Canada.

“There’s been a lack of commitment for rail traffic going north and south, and that has always been the big problem with the oat market. The rail traffic is not been adequately resourced to move north and south.”

Oats are typically shipped north and south because the majority of the milling markets are in the U.S. Midwest, he says.

“So going east and west takes us further away from where it’s got to go,” said Jubinville. “It’s ridiculous in the sense that the primary milling market is an eight-hour drive away, but we can’t get to it because we don’t have the railcars.”

The backed-up rail system also puts pressure on trucking transportation for other commodities, he added, and as transportation availability decreases, commodity prices increase.

“Some of the big grain companies just have an extraordinary basis deduction that drives down the cash price, because they’re focusing right now on moving canola and wheat and all of that’s going east and west,” said Jubinville. “The available elevator storage space in the commercial system has made oats a minor priority behind all that.”

A report released Friday by Statistics Canada had forecast oat acres at 3.046 million, down from 3.188 million forecast in StatsCan’s March seeding intentions report.

— Marney Blunt writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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