This is Devon --Farming Editor
The increased area of oats harvested this summer may result in a surplus for which there is no clear market – home or abroad.
Following the wet autumn and winter of 2012 many growers switched to oats for their fit within rotations, and because there was seed available. Some will have secured buy-back contracts offering premiums or set prices, but many are likely to have planted the crop on a speculative basis with no guarantee that the market would meet their price expectations.
The latest figures from Defra suggest that farmers planted about 138,000 hectares, an increase of 50% on the previous year. When extrapolated to include Scotland, Wales and Northern Ireland the total area is likely to be in the region of 164,000 hectares, an increase of 39% on 2012.
According to Openfield market analyst, Cecilia Pryce, this could result in a crop of about one million tonnes, assuming yield reports are accurate.
She said: "While domestic demand for oats has been rising steadily over the past few years due to the increasing popularity of cereal bars and speciality biscuits, it remains largely static at about 700,000 tonnes.
"Identifying a market for the surplus will be a challenge and may require considerable price corrections to ensure competiveness with other exporters. Demand for oats is largely inelastic, as it is a poor substitute for wheat and barley, even in animal feed rations. Of course, if the price were to fall far enough this may change."
She argued the only credible option for disposing of this surplus was to export it, but with the major oat-producing nations of continental Europe and Scandinavia also enjoying sizeable crops this would require some clever marketing. "Early indications are that Romania and Spain also enjoyed an oat harvest well above recent performance, while Poland, the EU's largest oat producer, had a respectable crop too," she added. "Across the EU 28 the oat crop is expected to come in at about 8.5 million tonnes compared with 7.9 million tonnes in 2012."
Historically the UK would have looked to Spain to take some of the surplus, but with a sizeable surplus of its own to move that is unlikely to be an option.
"Worse still, our friends in Finland and Sweden will be keen to move their surpluses, and, as if that wasn't bad enough, if the reports about Romania are correct it is well placed to satisfy any Italian demand. This leaves the UK rather short of destinations," said Mrs Pryce.
Outside Europe demand is likely to be covered by nearby producers, with Canada satisfying almost all of the demand from the USA and Australia meeting the needs of Asian consumers.
So the challenge facing merchants was to identify the smaller markets. Reported by This is 10 hours ago.