(Resource News International) — A large supply base of oats has been steadily deteriorating cash bids in Western Canada, in a downtrend not expected to end soon.
“Oat supplies at the end of the 2009-10 crop year are expected to be the second largest on record,” said Real Tetrault, CEO of Emerson Mills at Emerson, Man.
“The problem with that is that this follows the record ending stocks of oats that were established in 2008-09.”
The possibility of record oats area being seeded in Western Canada in 2010 also does not bode well for prices at this stage of the game, he said.
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“Producers, due to rotation issues, have to plant some sort of cereal grain, and in comparison with the alternatives, oats still pencils out not too bad,” Tetrault said.
However, the problem is that there are just too many oats around and absolutely not enough demand.
Based on statistics that Tetrault had, usage of oats from a feed and export perspective were down 23 per cent from the year-ago level.
“Basically on farm usage of oats has dropped to the lowest level in almost 50 years,” which only contributes to the oversupply situation, he said.
Lower livestock numbers in Western Canada have helped to reduce oats usage, as has competition with other feed alternatives such as dried distillers grains (DDGs).
“Even if the grain stocks in all positions report on Monday showed oat supplies in Canada lower than they were a year ago, the bottom line is that on July 31, 2010, they will still be the second highest on record,” he said.
The large supply situation — and the expectation that U.S. corn production will be record-large in the upcoming crop year — has not done new-crop oat bids any favours either, said Tetrault, whose company operates on the U.S. border about 90 km south of Winnipeg.
Little if any new-crop contracting was occurring at current values, he said.
“The fact that there don’t appear to be any production-related problems in the cards for oats also has helped to reduce the chance of a price spike,” he said.
Old-crop bids for oats, delivered to the elevator in Saskatchewan, based on Prairie Ag Hotwire data, currently range from $1.44 to $1.56 a bushel, in Manitoba from $1.81 to $1.98 and in Alberta from $1.05 to $2.39.
New-crop bids for oats, delivered to the elevator in Saskatchewan, based on Prairie Ag Hotwire data, currently range from $1.49 to $1.82 a bushel, in Manitoba from $1.70 to $1.98 and in Alberta from $1.92 to $2.08.
Old-crop bids for oats about a month ago, delivered to the elevator in Saskatchewan, ranged from $1.50 to $1.84 a bushel, in Manitoba $1.96-$2.18 and in Alberta $2.10-$3.27.
New-crop bids for oats about a month ago ranged from $1.75 to $2.05 a bushel in Saskatchewan, in Manitoba around $2.15 and in Alberta, $1.97-$2.10.
