A pitch for oats

As part of our new series in Wheat & Chaff called "What your checkoff gets you," Jack Dawes will prepare something for June on behalf of the Prairie Oat Growers Association. In the meantime, Jack wrote this short pitch for oats for me to post here on my blog:

"After the near record crop of 2007, growers did cut back their oat acres in 2008, but mother nature still provided a large crop last year. Now, with oat prices going through a recovery phase and the Stats Can numbers showing a nine per cent oat acreage reduction, it's clear farmers will cut back oat acreage again this year. Still, experience shows that oats can be profitable at $2 per bushel. And because of oats requiring fewer crop inputs, plus the obvious agronomic/rotational benefits oats provide, no doubt oats remain "front-of-mind' in many farmers' planting decisions this year."

Pony oat markets

Perhaps Jack will write his "What your checkoff gets you" item about POGA's effort to rebuild sales into the U.S. race horse market. Here is a report on that topic from the Oat Scoop newsletter from March 2009:

There are an estimated 9.2 million horses in the United States. Could they be eating more oats — especially Canadian oats? No doubt they could, writes Vancouver-based oat industry expert Randy Strychar. But the problem is, horses don’t exactly decide what they will eat.

In a recently-completed study for the Saskatchewan Oat Development Commission (SODC), Strychar notes that by 1993-94, the U.S. horse market was importing, and more importantly, consuming, 1.076 million metric tonnes (mmt) of high quality oats from the world oat production leaders — Canada, Sweden and Finland. (Strychar thinks the number could be higher because no one knows for sure what tonnage of locally-grown oats might be literally be “eaten up” nor is it known what percentage of oats purchased for milling may, in fact, end up as horse dinners.) But what is known is that by 2006-07, U.S. equine oat consumption had fallen to 467,000 mmt. (The five-year average is 559,000.)

“The primary factor that cut U.S. horse consumption of oats by nearly 50 per cent was the increase in oat prices relative to other feed grains such as corn and barley.” In light of ever-increasing input costs this may not be a message Canadian farmers want to hear. But the facts are these: A “sharp and significant” climb in oat prices relative to corn began in about 1995. Much of that price increase was tied to the arrival of index fund buying of oats. Participation by the funds was good news for growers in that it pushed cash and futures higher, keeping oat prices “artificially” above corn by as much as US$30 to $50 per tonne.

But the down-side was looming. Feed processors had to be thinking about lower cost possibilities. At that point, a rising Canadian dollar, combined with a steady climb in rail rates, was taking the wind out of equine oat demand. In reaction to their own rising input costs, Strychar writes, as equine feed formulators began seeking other “least cost formulations”, their focus turned to corn, soy meal, beet pulp and barley.

At the same time, horse owners were finding pellets to their liking. Some of those pellets contain no oats. (So far the horses have not commented.) According to the study, “The pelleted feed provided several advantages over textured oat feed and straight fed oats. Pelleted feed allowed for a more balanced control of the equine feed, ease of including vitamins and minerals in rations and the ease of handling and storing of the feed.”

In short, the high price of oats “opened the door to other options”. Strychar goes on to say that the two single largest U.S. commercial equine feed manufacturers — Cargill-owned Nutrena and Purina Mills, owned by Land-O-Lakes —have put some big dollars into research and development of these pelleted rations. He suggests the industry will be ‘cautious’ about any “alternatives”.

So what’s the answer?

Strychar found many in the industry and research field who still deem oats to be the ultimate feed for horses and he has made 10 recommendations to the SODC. He concludes:

“What the research and results of this report clearly indicates; is there is a huge and significant alternative commercial demand market for Canadian oats in the U.S. equine/horse market, a market that is already developed but suffering from, to a large degree, a clear lack of resources, focus and direction. It is clear that the key to increasing oat consumption lies at the consumer end of the market, specifically at improving the benefits to horses. It is the opinion of this writer that solid efforts from the Canadian oat grower associations can have a significant impact on the feed oat market that will appreciably benefit Canadian oat growers, increasing both commercial demand and oat production.”