Oat Prices Explained

Oat prices are forecasted to show stability in the market as supply and demand seem to align. Acres are expected to increase and the commodity is relatively profitable compared to other crops. While the feed sector posted reduced demand, increasing oat application in the beverage industry as a functional drink expanded its market. 

Why are oat prices fluctuating?

1. Weather Conditions

Several comparative studies conducted in Minnesota and Finland revealed that oat yields are severely impacted by spring and summer warming. Thus, its availability and market price depends on its total output.

For instance, summer droughts in the U.S. decreased oat production by 40% according to Chad Hart, a professor of economics and crop markets specialist at Iowa State University.

Additionally, the intense heat and freezing frost also knocked Brazil’s grain business by 8% according to its government’s federal data. Overall, these significant changes in weather temperature take hold on oats supply and prices.

2. Demand

The rise of various fad diets also shapes oat demand and price variation.

Oat has lots of health benefits that are necessary for a healthy diet. Additionally, doctors recommend oats as part of the meal diet which strengthens their demand in the market. As a result, the increasing need for oat consumption certainly affects its price markup.

3. International Trade Policy

The U.S., the European Union, Canada, and international organizations imposed product sanctions against Russia after it invaded Ukraine.

Russia (the largest oat producer in the world with 4,424,433 tons of oat production per year) is left to find another alternative market. Thus, the country leverages its Asian connections coupled with export discounts to China, Mongolia, Turkey, Pakistan, and South Korea.  As a result, the ban subsequently drives the oat price in the market, particularly in Europe

Which variables impact the price of oat?

• Weather Conditions
• Demand
• International Trade Policy
• Production Costs
• Competition from other Crops
• Government Policies

Where does oat come from?

The Paleolithic hunter-gatherers first incorporated oats into their diet 32,000 years ago through hand grounding and cooking it in boiling water.

Its popularity grew when the Romans introduced it to Scottish farmers in the British Aisles. Oat further expanded in North and South America in the 17th century through English immigrants and trade.

Presently, oat ranks as the 7th most important cereal after corn, rice, wheat, barley, sorghum, and millet. There are 3 species of oats circulating in the food and animal industry:

1. Avena sativa – The ones we buy from the grocery and thus, part of our breakfast and snack diet.

2. Avena byzantina and Avena strigosa – These species are for animal feed such as horses, cattle, goats, sheep, poultry, pigs, and dogs.

3. Avena abyssinica – This type of oat is exclusive only to Ethiopia and is part of the African diet.

Overall, Russia tops the oat-producing countries globally, with an average of 3.8-3.9 million metric tons of yearly oat production. Canada, Poland, Finland, and Australia follow distantly.

What is the future price of oat?

The commodity’s price is forecasted to increase as the Western cropland consistently experiences a warmer and drier winter, lessening its productivity. Additionally, equipment costs per acre go on a price hike as the supply chain log and inflationary measures influence manufacturing, materials, and labor value.

On the demand side, the commodity establishes a solid application in the food and beverage industry, contributing significantly to its market. Also, it carves out a niche in the cosmetics and personal care industry, providing a sustainable and natural alternative for various products.

For example, Oatly produces plant-based milk and dairy alternatives to capitalize on the growing nutritional trend. Lush Cosmetics incorporates colloidal oatmeal to soothe and hydrate the skin.

These companies are part of a broader trend toward natural and sustainable beauty and food products, appealing to consumers who prioritize eco-friendly and health-conscious options.

Overall, the oat demand and prices come after its increasing consumer popularity due to its healthy benefits. Thus, oat prices will remain elevated at $467.80 per bushel in 2028.