United Kingdom
October 13, 2016
Source
Increasing demand for food products containing oats, combined with declining global oat production, will continue to increase world oat trade. While 10 countries still account for 85% of the world’s oat trade, there are new emerging participants.
by Randy Strychar, OatInformation.com
External contributor
Global trade up on the up
After nearly ten stagnant years, world oat trade is again trending higher, with global oat imports and exports climbing to new record highs in 2015 (Figure 1). This comes despite steadily declining oat production and reduced feed use of oats in most global regions and countries.
Driving the rising oat trade is the increasing demand for food products containing oats, such as breakfast cereals and snack bars, and the healthy reputation oats have with consumers, which is prompting food processors to develop new uses for oats.
The decline in oat production is the single largest driver of the record trade in oats, as millers and processors look to non-domestic sources to meet their increasing demand for milling quality oats. We are seeing this in not only conventional oat markets, but also organic and gluten free, as well as oat product (flake, flour and groat) markets.
The long term steady decline in oat production is a direct function of “consistently” low net returns for growers. Other commodities, such as wheat, oilseeds and specialty crops, are providing significantly better returns in most countries and regions, a trend that will remain in place moving forward.
Reduced feed demand for oats, commercially and on farms, has also contributed to the declining trend in oat production and rising world oat trade. Historically, oats were fed on farms in large volumes but declining animal numbers in many countries have reduced the demand for feed oats, and hence, production has declined. Increased use of complex compound feeds has also resulted in sharp declines in oat use in horse feed markets.
The combination of declining feed use of oats and production will continue to see world oat trade trending higher, as millers are left with few options to maintain a steady supply of quality oats.
Key players
While global oat trade continues to increase, we have seen little change from the fact that a limited number of countries account for the bulk of the global oat trade, imports and exports. There are however, some emerging trends, as new players enter or increase their participation in the global oat trade, and others take a smaller role.
Total global oat exports climbed to 3.2Mt in 2015, with imports rising to 3.3Mt (Comtrade). This compares to a stagnant period between 2005 and 2013 when imports and exports averaged around 2.75Mt. Since 2005 world oat exports have climbed only 19%, with maize and wheat gaining 47% each.
What has not changed, however, is the fact that ten countries account for 86-89% of the world’s oat imports (Figure 2a) and exports (Figure 2b). This has been a fairly stable trend over the past ten years.
Canada and the U.S. remain the single largest exporting and importing countries respectively, each accounting for around 50% to 55% of the world’s oat trade between 2010 and 2015. This, however, is down slightly from 61% in the prior five-year period. These two countries have the largest global oat milling industries and strong traditional demand for breakfast cereals and snack bars, as well a problematic but supportive hedging mechanism in the CBOT oat futures contract.
Nonetheless, there has been a recent decline in trade in these two countries. This is directly related to the reduced demand for oats in U.S. horse markets since compound feeds became more popular in the late 1990’s. Increased use of compound feed formulations has resulted in a drop in demand for oats, as feed manufactures look to cheaper alternatives such as maize and barley.
At OatInformation.com, we do not however, see the Canadian and U.S. global oat trade share dropping significantly over the next 5 to 10 years. This is because demand for food products containing oats will continue to increase, offsetting the expected further losses in commercial feed demand.
New emerging trends
While the overall global oat trade share of the combined top ten countries has held fairly steady, we are seeing new emerging trends in the global oat trade that could see a shift of who remains in the top ten. Historically Sweden, Finland, and Australia have been the largest global oat exporters behind Canada (Figure 3).
In terms of imports, four countries, US, Germany, Mexico, and Spain have accounted for the bulk of the world’s oat imports (2006-2010). These countries have seen their market share gains slow, or in some cases slip, as the five-year “Compound Annual Growth Rate” (CAGR) is indicating (Figure 4).
We are now seeing new players emerging onto the global oat trade market, including oat exporters Lithuania, Estonia, Poland, and the United Kingdom. Meanwhile, China has particularly grown its imports and is now the third largest global raw oat importer.
While the total tonnages of these countries do not rival Canada and the U.S., they have steadily increasing numbers, with strong potential based on increasing global demand for food products containing oats, and emerging domestic oat milling and food processing industries.
By far the largest emerging markets for oat trade (raw oat and oat products) are China, South East Asia, and India, and the Subcontinent. In China, for example, oat imports have risen from c.14,000 metric tons in 2005 to c.150,000 metric tons in 2015. In terms of growth, this is the single largest gain we’ve seen in the past ten years among the emerging markets. India is not yet a major raw oat importer but it is increasingly importing more oat products. It’s expected that more oat processing will develop within these countries and regions, as diets shift with the younger generations.
Concluding comments
As oat production continues to trend lower globally, we are expecting more integrated global oat trade moving forward. Removal of global trade barriers will add to this increased integration. An example is the pending Canada/EU free trade agreement, which if realized, will open the doors for Canadian oat and product exports to the EU, as import tariffs ranging from €89-162/t are gradually removed.
Canada is in the process of opening the Chinese market to Canadian oat exports, an advantage Australia has enjoyed to this point. Eastern European countries will also continue to see higher oat trade as traditional exporters such as Sweden and Finland look to other crops and their own domestic oat milling industries continue to develop, resulting in less oats exported.
Key points
- World oat trade is again trending higher
- 10 countries still account for 85% of the world’s oat trade but there are new emerging participants.
- Increasing demand for food products containing oats, combined with declining global oat production, will continue to increase world oat trade.
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