World Grain - January 2023 - 52

FEATURE: OATS IN HIGH DEMAND FOR MILK PRODUCTION
An aerial view
of the Grain
Millers Canada
Corp. oat mill
in Yorkton,
Saskatchewan.
they buy, often paying a significant premium to get the
whitest and shiniest grain.
Much of Canada's exportation of raw oats are to states
in the southeastern US like Kentucky and Arkansas
where there is a large equine population. Quality oats
grown in Finland and Sweden long have been a supply
origin to the region as well.
Bird seed is another niche export market for oats,
particularly for one or two smaller millers on the
Prairies. A high proportion of households in the
Caribbean, Central America and Mexico keep parrots.
Groats constitute a big part of the blends made by
bird seed suppliers in the region.
Secular decline
Today's buoyant scenario stands in contrast to the
decades-long secular decline in US oat production,
perhaps the most remarkable drop for any American
grain crop in the past century. From 1960 to 1964,
the first years for which USDA data is readily available,
the average US harvest was 14.5 million tonnes.
During the last half-decade the crop has averaged
790,000 tonnes, just over 5% of what it was over 50
years ago.
USDA oat data for Canada is only available since
1980. Average Canadian production has been 28%
higher on average since 2018 versus the 1980 to 1985
period. US production, on the other hand, is now just
11% of what it was in the first half of the 1980s.
Randy Strychar, founder and director of the industry
consultancy OatInformation, pointed to a couple of
reasons for the overall decline: " No horses and the US
farm bill. Government support payments are favorable
to corn, soybean and wheat growers. Machinery has replaced
the use of horses in agriculture. "
52
Oatly Group
No discussion of oat-based beverages is complete
without a mention of Oatly Group AB, whose quirky
advertising appealing to younger generations has been
imitated by most competing brands. Beginning in the
early 1990s, the Swedish company began developing
the production technology for oat-based beverages in
Scandinavia. Sales accelerated with the dairy alternative
beverage boom and the company set out to globalize
its Oatly brand. State-owned China Resources Co.
Ltd. took a major ownership share for a strategic move
into the Middle Kingdom.
Oatly Group AB's initial public offering on New
York's Nasdaq Exchange in May 2021 provided $1.4
billion in capital to underwrite its ambitious expansion
plans. The company's market valuation subsequently
reached $13 billion before its share price fell by over
90% to the current levels.
Nevertheless, the demand created by Oatly and other
new entrants has led in part to construction in 2022 of
new Bühler oat mills in Sweden and Finland, with the
latter well-positioned to supply China with food grade
raw material via a direct rail connection.
Oatly's lack of profitability notwithstanding, the current
oat milk phenomenon still constitutes a " game changer "
in the words of one industry veteran, putting a floor under
the long-term decline in global oat production and promising
a steady rise in high value food use of oats.
David McKee's grain industry consultancy, Key International LCC,
provides market research, feasibility analysis, technical studies and
project guidance to companies and organizations. He may be reached
at davidmckee59@msn.com.
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January 2023 / World Grain / World-Grain.com
Grain Millers Canada Corp. oat mill in Yorkton, Saskatchewan
http://www.World-Grain.com
World Grain - January 2023

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