A forecasted dropped in Canadian oat production of 9.4% this year, expectations of still strong on-farm feed use, coupled with forecasts of unchanged oat exports and 3.4% higher mill use is likely to produce an uncomfortably tight 2018/19 Canadian oat supply/use outlook.
We are currently forecasting 2018/19 Canadian oat end stocks at 0.530 Mt. If realized, this would be down 33% from 2017/18 levels of 0.784 MMT and 37% or the 5-year average (see right). The current estimate is in our opinion the best case scenario.
The two wild cards for the S&D remain on-farm feed use and possible increases in oat exports tied to shortfalls of milling quality oats in Europe and Australian oat production that is on track for a 12-year low.
The table above shows oat exports to major destination last year, forecasts for 2018/19 and the five-year average. These are traditional markets for Canadian oat exports.
The current 2018/19 forecast is 1.675 MMT. Should the EU come in for Canadian oats, and or traditional Australian importers turn to Canada, the Canadian oat S&D will tighten quickly, and cash oat prices rise.
The only offset to this would be lower on-farm feed use, and for this to happen, Western Canada oat prices will need to gain on wheat and barley. Oats have gained some on both cereals in recent months but remain close to multi-year lows. Oats remain the cheapest feed.