Gross Returns From Oats Improve

SASKATOON - Jan 14/10 - SNS -- Oats have not fully recovered from the commodity crash of 2008, but continue to be a high value crop for commercial grain farmers, market analyst Randy Strychar told the annual meeting of the Saskatchewan Oat Development Commission.

Noting that oats have rebounded about 75 cents per bushel from September 2009 lows, Strychar said Saskatchewan government data shows net return per acre on oats last January was about $27. But this year oats are returning an average $59.00 per acre – not in the running with crops like large green lentils, but showing healthy improvement and gaining on crops such as canola for net returns.

Strychar already is on record telling Manitoba farmers to hold out for $3.00 oats off the combine in harvest 2010. The net farm return scenario is part of a packet of evidence Strychar presented to support a bullish view of oat prospects this year. His view of lower projected ending oat stocks in Canada and the U.S. combined with strong milling demand lead him to predict a transition from a "bear" market to a "bull" market in the current calendar year.

But there are caveats. The suppliers of oats to North American mills-mostly Saskatchewan and Manitoba farmers –have been reluctant sellers at best-many having "put the lock on the bins". If they continue to withhold oats from the market, and if oat plantings continue to decline, as they have for the past several years, commercial oat prices will be strengthened.

On the other hand, markets took a sharp nose dive Monday after the USDA "found" some sizeable corn stocks for its latest statistical update. Strychar also calculates that emerging market forces and rotational concerns could push up to 10% increase in oat acres this coming spring, although he admits, "I'm a real nervous 10%, because the returns right now are telling me, I don't think we are going to get a huge increase."

One of the factors to watch, he says, will be how much forward contracting oat growers do between now and spring. Strychar urged farmers to watch for pricing opportunities and to take advantage of seasonal potential for prices to rise February and sell forward as far as possible to capture premiums, while looking to hit long-term market averages.