(Natural News) Prices for oats and grains are up nearly 150 percent over the last year due to extremely dry weather in key growing regions. The drought was estimated to cut U.S. oat production by up to 40 percent, with the United States Department of Agriculture (USDA) saying this year’s oat crop was the smallest on record at only 40 million bushels.
Oat prices are now at an all-time high, with December oats trading well above the $7-mark.
Jim Hilker, professor emeritus at the Michigan State University (MSU) said that the market usually overshoots, but the fundamentals behind these estimates remain the same. “Think about where oats and barley and those types of things are grown. They’re grown in the same areas where we had a lot of drought. And they also had planting problems. So acreage was down, yields were down,” he said.
Hilker noted that this is similar to wheat production issues from spring when it hit $10. As demand remains, questions regarding prices continue. One economist said the demand for U.S. grains is still robust even in countries like China.
David Ortega, a food economist with MSU, said: “I do think we’ll see sustained demand for some of the U.S grains in China. They built back their hog herd after was decimated from ASF [African Swine Fever]. But what’s been really unique about China is that the outbreak of ASF has changed their production method.” (Related: “Megadrought” threatens crop yields in America and global grain inventories, warns USDA.)
Ortega said that he started traveling to China in 2008, and that the hog herd there consisted mainly of backyard animals that are prone to diseases and other issues. But with large operations now ongoing, including “pig hotels” with tens of thousands of animals, China will be relying on grain – a lot of which comes from the United States.
“So, I do see that being sustained, but it’s not going to be as high as we saw earlier in the year when they were building back that hog herd that was cut by about half,” he said.
Trey Malone, an extension agricultural economist at Michigan State University, doesn’t think that the historic price run of wheat and oat prices will cause a major acreage switch in states like Michigan.
Oat futures soar the past three months
Because of the severe dry weather in oat-growing regions, oat futures are now more than twice as expensive as they were this time last year and the year before. Much of the rise came in the past three months as farmers harvested oats that were sown earlier in 2021.
Normally, prices fall at this time of the year as a new crop hits the market. But with high prices for competing crops such as wheat and corn, U.S. farmers were prompted to plant roughly 13 percent less acreage with oats. With the reduction in acreage and the dry record, the USDA expects the smallest oat crop on record.
The drought has slashed the number of oat bushels grown per acre, with some crops failing to produce in some places. Farmers were forced to abandon oats or cut it as feed for livestock.
Similar conditions also reduced yields in parts of North America’s main oat-growing region, which stretches from Alberta to Saskatchewan in Canada, as well as Wisconsin and Iowa in the United States.
The surge in oat prices is only the latest price hike in agricultural commodities. The supply chain bottlenecks, rising demand and severe weather have pushed up prices for other raw materials as well, raising investors’ worries about inflation.
The growth in oat production coincides with the consumers’ growing acceptance of plant-based milk products, with oats sales jumping from 0 percent to 14 percent between 2018 and 2020. Analysts at JPMorgan Chase & Co. said: “Two decades ago, soy varieties were dominant, then almonds took over and now oats are having their day.”