Canada Markets

Even with an anticipated increase in area and related production of oats in Canada in 2025, exports will have to fall to maintain near record low ending stocks for 2025-26 thanks to tight beginning stocks, according to Agriculture and Agri-Food Canada (AAFC). With the United States drastically reducing oat production in favor of more profitable crops and relying on imports from Canada over time, it is expected to leave their ending stocks at record low levels. That sets the stage for a volatile weather-related market ahead given the many events that could cut into the already tight supply projections.

The first realistic look at seeded area in Canada will be released on June 27 by Statistics Canada. It had released an Estimate of Principal Field Crop Areas report on March 12, but that was based on a survey conducted in December and January with many factors changing drastically since. For what it's worth, at the time Statistics Canada pegged 2025 oat acreage at 2.978 million acres, up from 2.9 million in 2024 and 2.535 million acres in 2023. The 2023 low level was in response to overproduction in 2022, thanks to the price spike following 2021's crop failure. The harvested area is still expected to be the fifth lowest on record, assuming planted area did increase as suggested in March.

As of the week ending May 23, Manitoba reported most oats are in the ground with some exceptions in the Southwest and Northwest regions. Saskatchewan pegged the crop at 55% seeded, while in Alberta oat seeding is 47% complete. With only Southeast Saskatchewan and Southwest Manitoba experiencing above- to much-above-normal rainfall since April 1, the area that was supposed to go into oats likely will.

The greater concern could already be the northern half or better of the Canadian Prairies that are extremely dry with large areas receiving under 40% of normal precipitation since April 1, Northcentral Saskatchewan in particular. Long-range outlooks don't offer much relief for the crop or traders' anxiety with a warm and very dry June-July-August period expected.

Going back to the tight ending stocks, Statistics Canada surely inspired the changes to AAFC's estimates on May 21 with its March 31 Stocks of Principal Field Crops report. March 31 oat stocks came in at 1.283 million metric tons (mmt) compared to 1.476 mmt last year. That puts them barely above the 2022 level of 1.227 mmt following the devastating drought of 2021. As mentioned, prices eventually exceeded $11 per bushel (bu) CAD in Southern Manitoba at the time as physical short positions had to be bought out. Interestingly, on-farm totals are just as tight with only 1.006 mmt remaining on March 31 compared to 1.137 mmt last year and not much above the 0.925 mmt on farms in 2022. Other than the 2022 low, you have to go back to 2003 to find tighter stocks in that case.

As a result, AAFC not only increased its estimate of 2024-25 exports by 100,000 mt, it cut food & industrial use by 15,000 mt and feed, waste & dockage by 35,000 mt -- with the reductions likely out of necessity to avoid ending stocks falling below 2021-22 levels (considered minimum pipeline).

Although futures prices are less significant in the case of oats as the cash market often diverges from them, the long-term charts have a well-defined range between $3.50-$4.00/bushel since mid-2022. One spike up out of that in 2023 was quickly lost when it was confirmed that enough oats would be seeded to look after demand. Any sign of smaller production than currently projected for 2025 would presumably result in a breakup and out of that range.

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Mitch Miller can be reached at mitchmiller.dtn@gmail.com

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