PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 16:46 UK, 20th Sept 2013, by Agrimoney.com
UK faces 'serious situation' shifting oats surplus

It is not just milling wheat which the UK (unlike most other countries) faces a surplus of.

In oats too, the country has an unusually large surplus which is confronting farmers, and traders, with what Robert Leachman, oats trader at Gleadell, a "serious situation" on how to find homes for the grain.

The surplus threatens a second blow to growers already seeing hopes for strong returns from a high quality wheat crop undermined by a weak, domestic, milling premium on top of a base price undermined by weaker world grain prices.

At Openfield, the agricultural co-operative, market analyst Cecilia Pryce, said: "Identifying a market for the surplus will be a challenge and may require considerable price corrections to ensure competiveness with other exporters."

Jump in plantings

The extent of the surplus reflects, another, knock-on effect of the dismal autumn sowing conditions last year, leaving many growers with extensive areas unplanted come the spring.

Mr Leachman told Agrimoney.com: "It was known that there would be a lot of plantings of malting barley," boding ill for prices.

"So some farmers went for oats instead, without necessarily lining up a buyer for it."

Oats sowings soared 50% to 138,000 hectares in England, data on Thursday confirmed, provoking Openfield expectations of a 164,000-hectare crop UK-wide, the highest in at least 30 years, and a harvest of about 1m tonnes.

Export competition

That crop is far in excess of food demand of roughly 500,000 tonnes for oats, with typically a further 200,000 tonnes or so taken in other uses such as feed.

"Demand for oats is largely inelastic as it is a poor substitute for wheat and barley, even in animal feed rations," Ms Pryce said.

And export options are limited too, given strong harvests in the likes of Spain, a natural import market for UK feed grains, as well as Finland and Sweden, usual exporters.

Buyers in the key German market "are likely to take these milling oats rather than ours", Mr Leachman said.

He noted the geographic proximity, and the fact that, in the UK south, many cops "had the stuffing knocked out of them by the heatwave we had in July", with the best quality supplies tending to come from the north.

'Serious situation'

Further afield too, major oat exporters such as Australia and Canada are expected to show much better crops this year.

Ms Pryce said that the challenge for UK merchants was to identify smaller markets, although "there lies the net problem they are all likely to want prime milling oats".

Mr Leachman said: "We are in a serious situation," although "at the end of the day, price will dictate" and find some form of home for the surplus oats.

While he was unable to give a reliable indicator price for oats, values had "already come down quite significantly", he said.

Benchmark Finnish oats, in Vaasa, have fallen by 26% over the last six months to a three-year low, according to data from the UK's HGCA crop bureau.

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