A drought has hit North American oat fields this season, and farmers are harvesting such a small crop that prices have reached record highs, signaling inflation for breakfast staples such as flour of oats and trendy alternative milk.
The very hot, dry weather likely cut oat production by almost half to an 11-year low in Canada, the world’s largest exporter. Likewise, in the United States, one of the world’s largest grain consumers, the harvest is expected to be the lowest on record. The result is unprecedented costs which are likely to be passed on to consumers.
The plight of North American farmers was so dire in the summer that many cut losses and harvested damaged plants to sell as animal feed. That means there’s even less for making popular foods like granola bars and Cheerios, the # 1 cold grain in the United States.
“You can’t make a Cheerio with barley,” said Randy Strychar, president of Ag Commodity Research and Oatinformation.com.
While major food companies have yet to announce price increases for oat products, higher grain costs can only add to the food inflation that has plagued this year.
Global food prices recently hit a decade high, according to a United Nations index, while oat futures rose 2.1 percent on Friday to a record high of US $ 6.36 on Friday. bushel.
Oats have a modest history as a breakfast choice in the form of oatmeal or cereal, but more recently it has become a fashionable Millennial darling.
Food companies targeting younger, affluent consumers are promoting it as an accessible superfood. Environmentalists tout it as a key crop for reducing carbon emissions in agriculture.
It has shaken up the alternative dairy market, with oat milk sales in the United States having increased nearly 70-fold since 2017. It now accounts for 16% of non-dairy milk sales, more than soybeans, rice. and coconut milk combined, and second only. with almond milk, according to data from NielsenIQ.
To ensure supply, oat milk maker Oatly Group AB has scoured the world in search of reserves and has made contracts in the Baltic States and other countries, in addition to Canada. The Swedish company just needs to increase production and sales over the next year as planned, which helps offset higher oat prices.
Oat costs represent less than 10% of global retail sales, the company said in a statement.
In August, Oatly’s forecast revenue would increase by 64% this year.
The company declined to comment on pricing.
As for Cheerios cereal – which coincidentally celebrates its 80th anniversary this year using its original name, CheeriOats – General Mills Inc was able to obtain enough North American oats to maintain the volume of its ultra-important brand, thanks to its scale and “long-standing relationships,” said Jon Nudi, president of the company’s North American retailing.
“Oats are a very important ingredient for us, Cheerios is our biggest brand in the cereal category,” Nudi said.
While, like other packaged food manufacturers, General Mills has increased prices in all categories, Nudi has not made a commitment to increase prices for Cheerios in particular, claiming that oat costs are not as a component of headline inflation.
While giants like General Mills and Oatly have been able to get their oats, there isn’t much that can be done.
Joe Ennen, CEO of SunOpta Inc., a major supplier of oat milk, in a statement compared the “difficult” supply environment to the shortage of computer chips that has plunged the electronics and automotive industries into turmoil.
Food companies are scrambling to source and Canadian exports are reportedly down sharply this year, said Chuck Penner, president of LeftField Commodity Research in Winnipeg, Manitoba.
Normally, when the prices of a commodity soar, it gives farmers an incentive to grow more the following season and address supply shortages, but there is no guarantee that will happen for oats.
The drought has hurt many other crops, so there is competition, said Lawrence Klusa, president of Winnipeg-based consulting firm Seges Markets.
Canola, flax, lentils, durum and mustard also sell for high prices and more could be planted next year instead of oats.
“Everyone is trying to meet their needs before the oats run out,” Penner said. “It’s a bit of a panic right now.”
Gold for December delivery fell US $ 1.80 to US $ 1,757.40 per ounce, down 0.06% from the previous week.
‧Money for December delivery rose US $ 0.05 to US $ 22.71 per ounce, up 0.75% weekly, while December copper rose US $ 0.04 to 4, US $ 28 per pound, up 2.15% on the week.
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