Analyst Suggests Long-Term Strength Ahead for Oats

Amid major supply shortfalls, the days of $2/bu oats may not be revisited for years, according to an independent crop market analyst.

“I don’t think we’ll ever be at ($2/bu.) oats over the next four or five years,” said Brennan Turner, founder and former CEO of online crop marketing platforms FarmLead and Combyne Ag. “The only reason we’re going to be at $2 oats is if there’s a massive run of production, almost bumper harvests in North America and the EU. I can’t see it happening over the next two growing seasons.”

Turner, a Foam Lake native with a degree in economics from Yale University, was speaking at the Saskatchewan Oat Development Commission’s (SaskOats) annual general meeting in Saskatoon on Jan. 12.

Oats were the best performing commodity in 2021, Turner said, with Chicago futures rising more than 89% to US$6.83/bu from Jan. 1 2021 to Jan. 1 2022. “Where does this compare to years past? The answer is it doesn’t compare. It’s completely a different ecosystem, a different galaxy,” he said.

However, the New Year has not been as kind to oats, with the March contract now trading down near $6, well off its November 2021 high of near $7.80.

Canadian oat production amounted to just 2.606 million tonnes in 2021, down 43% from a year earlier, due to severe drought across the Canadian Prairies. Oat output in the US – which is Canada’s biggest export customer - was also hit hard. Turner admitted that Canadian oat acres are likely to rise in 2022, simply based on the strong old-crop prices, stealing planted area away from such crops as malt barley, Hard Red Spring and perhaps durum. However, in order for oat production to have a “great rebound” this summer, more precipitation is needed across Western Canada.

“It’s a function of this moisture deficit we’re seeing year-over-year. I think you’re going to see more acres across the board (in) Saskatchewan and Alberta. Maybe not so much Manitoba because with corn, soybean and canola prices the way they are, some of that oat production may suffer as a result,” Turner said.

If there is another serious drought in 2022, Turner said oat prices could rise into the double digits.

Agriculture Canada is projecting 2021-22 Canadian oat ending stocks at 200,000 tonnes – down from 659,000 a year earlier – but Turner said he believes stocks could ultimately end up even tighter, at around 100,000 tonnes.

“That’s basically a nil carryout.”

Source: DePutter Publishing Ltd.

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