Without a rebound of the equine oat market, oat growers could see the crop slide into special crops territory and lose its spot on the Chicago Board of Trade.
Losing the CBOT oat contract is a development that would cost producers and processors dearly, according to Randy Strychar of Ag Commodity Research, who spoke about the issue at the annual Wild Oats Grainworld conference in Winnipeg.
Although not perfect, Strychar said the Chicago contract plays a valuable role in price discovery.
“It’s the best we’ve got and I’d hate to lose it,” he said. “It is flawed, it’s got problems, but it’s visible. You can go on right now and find the price of oats.”
Without a simple to access system for identifying oat prices, Strychar said farmers will move on to other crops that provide a clearer indication of a return on investment.
But Strychar said what frustrates him most is the lack of action by major food companies that have a stake in the issue.
“They should care because it’s going to raise the cost of procuring that commodity anywhere between 90 cents to $2.60 per bushel, and at 90 cents I’m being conservative,” he said.
The idea of having to contract hundreds of thousands of oat acres should be enough to scare food processors into action, but with only a few exceptions, Strychar said little had been done by oat buyers to help boost production. Even with good prices, acres are declining.
Strychar predicted Canadian oat plantings would fall to a record low 2.66 million acres this year. Production is estimated at 2.389 million tonnes, the second lowest on record.
He said oat growers are attempting to boost demand. “They are trying to get the equine market back, it’s the only sector that can really save the industry,” Strychar said.
Oats were once the mainstay of horse feed, but with pelleted feed formulas becoming more complex, the demand for equine oats has plummeted.
Would-be oat growers also have more options open to them than ever before, while research into oats and other specialty crops has diminished.
“Even scientists don’t want to work on oats or barley, they want to work on sexy things, which are the major commodities,” said Patrick Rowan, senior manager of Canadian Barley Operations for BARI-Canada Inc.
As genetically modified crops like canola and corn continue to increase, Rowan said specialty crops are facing stiffer competition for acres.
Strychar noted an increased interest in biofuel crops has also cut into the number of oat acres being planted.
Ratification of the Comprehensive European Trade Agreement (CETA) could open new markets for Canadian oats if it strikes down the current tariff system, giving demand a boost. But so far the trade agreement is a long ways away from finalization.
If something doesn’t change soon, Strychar said food companies are going to be surprised two or three years down the road when they realize they’re paying 30 per cent more for oats.
“It’s time for a wake-up call in the oat industry,” he said. “We’re really becoming irrelevant.”