Grainworld: Oats market a ‘trainwreck’

Winnipeg | CNS Canada — The oats market in North America is a “trainwreck”, and there’s not much positive in the six- to 12-month outlook, an analyst told the Wild Oats Grainworld conference here Tuesday.

“We have got bottlenecks all over the place. We are within an eyelash of shutting down the milling industry in the U.S. in terms of trying to get enough grain down there for them, and it’s not getting much better,” said Randy Strychar, president of Ag Commodity Research. [Related story]

Logistics problems plaguing Canadian farmers all winter have been causing a shortage of oats at U.S. millers, who only have about 20 days of supplies left before they are forced to shut down, he said, adding that there’s no relief in sight.

If Canadian oats can’t get down to the U.S., they’re going to have to shut down and try and source oats from other regions, such as Scandinavia — and it’s not looking like Canada will be able to get any railcars down into the U.S., as they are low on the totem pole for railcar allocation.

Railcars heading to Vancouver are the priority right now, because they have more capacity to move and store large amounts of grain, Strychar said.

Because of this, Canadian farmers are having a very hard time moving oats because they can’t be moved to end-users.

Strychar added that “cash trade right now has come to a trickle, and some grain companies aren’t putting bids out all the way to December, some not until February 2015.”

It could get worse because oats production might see an increase in Canada next year, Strychar added.

In a separate presentation, Jon Driedger of FarmLink Marketing Solutions in Winnipeg said oats acres could increase to around 3.5 million in 2014-15, from 3.17 million in 2013-14, as it is viewed as a cheaper cereal plant compared to wheat.

Agriculture and Agri-Food Canada’s latest supply and demand estimates also call for an increase in oats area, to 3.34 million in 2014-15.

The outlook isn’t all bad, Strychar said, adding there are some positive things for the Canadian oats industry going forward.

Oats are still very, very healthy and are good for the heart and regulating cholesterol levels, which will keep demand from the cereal industry steady.

It’s also a hardy, low-input crop that can handle many agronomic issues and generally provides good returns for farmers.

The brightest spot for the Canadian market is the free trade agreement Canada is working on finalizing with the European Union, Strychar said.

As soon as the tariffs on Canadian oats are removed, he said, a “brand new market” of possibly 1.4 million tonnes will be created for the crop.

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

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