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Published January 27, 2014, 09:44 AM

Reasons for optimism after oats' long decline

Oats were once one of the Upper Midwest’s most popular crops. They’ve been overshadowed for years, however, by more profitable crops, particularly corn and soybeans.

By: Jonathan Knutson, Agweek

FARGO, N.D. — Michael McMullen, veteran oats breeder at North Dakota State University, has this answer when asked about working with a crop that doesn’t get much attention.

“I like to work for the underdog,” he says with a smile. He adds, more seriously, “And I like the nutritional benefits of oats.”

Oats were once one of the Upper Midwest’s most popular crops. They’ve been overshadowed for years, however, by more profitable crops, particularly corn and soybeans.

Oats fare best in a cool climate, and North Dakota, Minnesota and South Dakota remain among the nation’s top oats producers. But planted oats acres in the three states have plunged more than 90 percent since 1968 and roughly 50 percent since 2003.

Nobody, not even oats’ biggest boosters, think the crop will stage a big comeback anytime soon. Competing crops are popular and well established, and oats’ price remains relatively unattractive.

What’s more, as oats become less common, many elevators in the region have quit handling the crop.

But supporters of oats say there are reasons to think their crop’s long decline may slow or even stop.

Longstanding public awareness of oats’ nutritional value is translating into greater sales, boosters say.

“Human food consumption continues to grow slowly but securely year in and year out. Oats is a very, very goodfood,” says Bruce Roskens, a veteran of the oats industry and director of crop sciences for Grain Millers Inc. in Eden Prairie, Minn.

Grain Millers Inc. manufactures whole grain products from oats and other crops.

Oats, a whole grain, provides a number of health benefits, according to the federal government’s 2010 Dietary Guidelines for Americans.

Greater emphasis on soil health and soil sustainability also could help oats. Growing oats in rotation with other crops can enhance soil fertility and hold down crop disease, experts say.

Neil Saunders, a Leonard, N.D., farmer, has been raising oats since the late 1990s.

“I like having a rotation that’s better for the soil than just corn and (soy)beans all the time,” he says. “I think it’s healthier to have a fuller spectrum.”

Roskens says grain millers “are really banging the drum” on the connection between soil health and oats.

The overall downturn in crop prices this year also could cause some farmers to take a fresh look at so-called minor crops such as oats.

The NDSU Extension Service’s 2014 Projected Crop Budgets, for instance, recommends that farmers search for profit opportunities in crops they generally don’t grow.

Projecting profits

The NDSU crop budget projections illustrate why oats have lost favor with most area farmers.

In southeast North Dakota, for instance, oats are projected to lose $57.40 per acre. In contrast, corn is expected to lose $12.25 per acre, with spring wheat earning an estimated $7.69 per acre and soybeans an estimated $62.81 per acre.

Oats also are estimated to be less profitable in other parts of the state.

Even so, oats are projected to be more competitive this year than they have been.

Last year, oats were projected to lose $37.13 per acre in southeast North Dakota. In contrast, corn was expected to earn $176.20 per acre, with spring wheat earning an estimated $85.86 per acre and soybeans an estimated $121.98 per acre.

In short, oats again come up short financially to other crops — but the difference isn’t as big as it had been.

Raising and selling oats for seed, rather than selling it at an elevator, can be profitable, says Mike Gartner, of Gartner Seed Farms in Mandan, N.D.

Oats sold for seed typically fetch a premium to oats sold for the cash market, says Gartner, who works with oats growers across the Upper Midwest.

Another thing to consider about selling oats: There’s still a relatively active futures market for oats on the Chicago Board of Trade, allowing farmers to hedge their oat crop, Roskens says.

When and if oats go off the CBT, oats could become like barley, which increasingly is raised under contract, he says.

Big acreage shifts

Oats used to be a big deal in the Upper Midwest. The region’s cool climate contributed to that, as did the use of oats to feed farmers’ workhorses. The arrival of tractors, however, limited on-farm need for oats.

In 1945, when many farmers still used horses, U.S. farmers produced 1.5 billion bushels of oats. They produced only 65 million bushels last year, according to U.S. Department of Agriculture figures.

Oat production also has suffered because corn and soybeans have spread north and west, experts say.

A few statistics illustrate oats’ decline:

• U.S. farmers planted 3 million acres of oats in 2013, down from 23.3 million in 1968. Just one acre of oats was planted last year for every eight acres planted 35 years ago.

• The acre losses are even steeper in North Dakota, South Dakota and Minnesota.

In North Dakota, farmers planted 225,000 acres of oats in 2013, down from 2.4 million acres in 1968. Just one acre of the crop was planted in the state for every 11 acres planted 35 years ago.

• Oats also are hurt by their declining use in livestock feed formulations. The greater supply of distillers dried grains, a coproduct of ethanol production, has worked against oats.

Oats account for just 0.4 percent of U.S. feed grain production in 2013 and 2014, with corn contributing 95.3 percent, sorghum 2.8 percent and barley 1.5 percent, according to USDA’s Economic Research Service.

Regaining a greater role in feed formulations would help U.S. oats production, Roskens says.

Similar situation in Canada

Canada is the world’s leading oats exporter, with the majority of it processed there and then shipped to foreign buyers.

The Canadian oats industry faces many of the same challenges as its U.S. counterpart, says John Smith, a seedsman with Seed Depot in Pilot Mound, Manitoba.

Pilot Mound, two hours southwest of Winnipeg, is in south-central Manitoba.

As is the case south of the border, competing crops such as corn and soybeans have spread north and west into parts of Canada where oats once was popular.

“There are better opportunities for the guys than oats,” Smith says.

Strong prices for wheat, barley, corn, soybeans and canola in recent years led some Canadian farmers to quit growing oats. Now, even though prices for the other crops have dropped, “It’s tough to get those guys back,” Smith says.

Once, oats were widely fed to cattle, hogs, race horses and pleasure horses. But competing feed grains have taken away much of that market, he says.

“Most oats is used for human consumption now,” he says.

Unfortunately, consumers in general don’t eat as much as the crops’ nutritional properties would warrant.

“There’s probably not a healthier food for people than oats. But people need to be of an age or wisdom where they’re concerned about such things,” he says.

Developing new varieties

McMullen helped develop Souris, an oat variety that produces high yields and test weights. It also has resistance to crown rust, the most widespread and damaging oat disease. More recently, McMullen, who’s been involved with oats since 1976, helped develop the Newberg and Jury varieties.

Newberg, released in 2011, offers excellent yield potential, average test weight and good resistance to crown and stem rust.

Jury, released in 2012, has excellent yield potential, good test weight and resistance to prevalent races of both crown and stem rust.

McMullen has no new releases pending, but is working to further develop oats with higher soluble fiber.

“We want to make it a more valuable crop to farmers, to increase yields and (also) to increase quality so people will pay more for it,” he says.

Developing new oat varieties takes about 10 years, McMullen says.

“We really don’t want to cut short the testing and put something out there that disappoints farmers,” he says.

Other state programs

A number of state oats breeding programs, including the one in Minnesota, have been phased out in recent years. Only a handful of states, including North Dakota, South Dakota and Wisconsin, still have such programs.

Lon Hall, South Dakota’s long-term oat breeder is retiring, but the state plans to hire a replacement, says Nathan Mueller, South Dakota State University Extension agronomist, whose crops include oats.

SDSU in 2012 released the Horsepower and Goliath oats varieties.

Horsepower offers excellent yield potential. Goliath is a multi-use purpose that can be used for grain production, forage or straw, according to information from SDSU.

Mueller says he is optimistic that oats will continue to draw interest from South Dakota farmers.

McMullen and others say there’s excellent cooperation among remaining oats breeders and others in the small, close-knit oats industry.

“We know each other, and we work well together,” he says.

Making money from oats

Modern oat varieties generally offer excellent potential yields, experts say.

Yields in experimental plots have exceeded 200 bushels per acre, McMullen says.

But he and others say area farmers sometimes give less care and attention to oats than other crops they raise.

Part of the reason is that some farmers plant oats as a so-called “combination crop.” They’ll use some for hay and harvest the rest for grain. Because some goes for hay, producers are reluctant to invest heavily in inputs that would boost grain production.

Experts who talked with Agweek recommend the following to farmers interested in oats:

1. Determine what your oats would be used for. Would they go for seed? For sale at your local elevator? Hay? Forage?

2. Make sure to have a market lined up before you plant.

3. Use a seed variety designed for the use you have in mind.

4. Treat oats the same as your other crops.

“Oats for 100 years has been treated as the low man on the totem pole. It doesn’t get managed all that closely,” Smith says.

“What I challenge guys to do is, plant it early, manage it well, spray it with fungicides. If you do, you’ll find it can be a profitable crop.”

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