Confidence seen in oat sector with Richardson deal

CNS Canada –– Richardson International’s decision to buy British-based European Oat Millers is seen as a strong sign of confidence in the oats sector, even if it has little effect on Prairie farmers.

“I think it’s very positive. We’re seeing lots of activity in the oats industry,” Art Enns, president of the Prairie Oat Growers Association, said in a phone interview.

Enns, who farms at Morris, Man., about 50 km south of Winnipeg, said Canadian farmers aren’t likely to feel any major effects from the deal, because substantial oat exports to Europe remain years away.

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Tariffs are scheduled to come down, gradually, under the Comprehensive and Economic Trade Agreement (CETA) between Canada and the European Union.

However, Enns emphasized, the deal adds to the flurry of activity underway in the sector.

He pointed to expansions at oat processing plants in Western Canada, including a $100 million expansion at Grain Millers in Yorkton, Sask., and at smaller plants at Emerson, Man., and in Alberta.

Enns also pointed to heavy demand for Canadian oats from the U.S. and Mexico, which is expected to continue for some time.

Canada, he said, is presently filling almost 100 per cent of the Mexican demand.

As well, U.S. millers have been stockpiling oats to hedge supplies, in the event of future delivery problems, as happened during Canada’s grain transportation crisis in 2014.

Enns also pointed to industry hopes that it will be able to improve access to Chinese markets and said discussions are already underway to that end.

Australia currently supplies most of China’s imported oats, and Enns said the amount Australia supplies is on a steady upward trend.

However, he added, Australia doesn’t have huge amounts of oats available, and that may leave an opening for a new seller. Australia shipped about 250,000 tonnes to China in 2015.

The Australian Bureau of Agricultural and Resource Economics and Sciences forecast oats in that country to decrease to 1.2 million tonnes this year. Canadian oat growers produced about 3.1 million tonnes in 2016.

Winnipeg-based Richardson announced Monday it had closed its deal to buy EOM effective June 15. EOM, of Bedford, England, is the second-largest oat milling company in Europe, while Richardson is the largest oat miller in North America.

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

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