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Published December 08, 2008, 08:00 AM

Oats production at lowest level since Civil War

BISMARCK, N.D. (AP) - Production of oats in the United States is at its lowest level since Civil War days, but those who use the grain in breakfast cereal or animal feed aren't worried.

BISMARCK, N.D. (AP) - Production of oats in the United States is at its lowest level since Civil War days, but those who use the grain in breakfast cereal or animal feed aren't worried.

There's an abundance of the crop just a little to the north, and it's getting cheaper by the day.

"We are not having any issues sourcing oats," said Heidi Geller, a spokeswoman for Minneapolis, Minn.-based General Mills Inc., maker of the popular Cheerios breakfast cereal.

Terri Long, a spokeswoman for the North American Millers' Association, said oat millers in the U.S. get most of their oats from Canada because U.S. production is not enough to meet the need.

Canada exports about 114 million bushels of oats annually - nearly equal to the 119 million imported annually by the U.S., said Jack Dawes, secretary-treasurer of Canada's Prairie Oat Growers Association.

This year, oat growers in Canada outproduced their American counterparts 3 to 1. Production north of the border neared 300 million bushels after high prices last spring prompted farmers to seed more acres.

Now, that big crop is helping push down market prices to nearly half what they were just half a year ago.

"We grew too many oats," said Bill Wilton, who farms near Winnipeg in the province of Manitoba. "We as Canadian producers do supply the majority of milling oats in the U.S. We have overproduced, and prices are reflective of supply."

That means cheaper feed for horses, too.

"These commodities have fallen out of bed. Right now, we're running backwards with prices where a year ago we were running up with prices," said Alan Woodbury, owner of Woody's Performance Horse Feeds in Dickinson, which supplies top race tracks around the country.

The oats situation is more complex than just a big crop in Canada. Commodity markets in general are affected by demand from the biofuels industry, Woodbury said. The global financial turmoil also has dealt a blow to prices for most crops.

"Oats is never a leader in the marketplace. It's a follower," Woodbury said. "So if beans and wheat and corn go down, oats is a follower."

Canadian farmers continue to grow oats in abundance because the weather conditions are better suited to the crop and because they can make money on it, while U.S. farmers can turn a bigger profit with other crops that are more heavily subsidized by the federal government.

"Essentially what pretty much killed (the U.S. crop) is (the) U.S. farm bill," said Randy Strychar, a global oat analyst in Vancouver, British Columbia. "When you look at (subsidies) for corn, wheat, soybeans ... the incentive has been to grow those three crops at the expense of oats."

Strychar said that barring a major shift in U.S. farm policy, oats as a major commodity south of the border "is unrecoverable."

Oats was a huge crop before farms became mechanized, North Dakota Agriculture Commissioner Roger Johnson said.

"It was used as horse feed before tractors," he said. "Oats were fed to horses and that was our energy."

Now, Johnson said, "Oats have fallen out of favor almost entirely because other crops have shown more profit potential."

Five of the top 10 oat production years in U.S. history came before 1925, according to federal data. The highest production on record was in 1945, at 1.5 billion bushels. The bottom 10 production years have come in the past 10 years, bottoming out this year at less than one-tenth of the peak production.

Unlike most other crops, oats has no major U.S. commodity group to spearhead promotion, research or marketing. In North Dakota - the nation's top oat-producing state - production is about one-fourth what it was 10 years ago and about one-fifth what it was 15 years ago.

"Oats just don't show a lot of feasibility to the grower," Woodbury said.

The situation north of the border is almost the reverse.

"We do tend to overproduce every few years and get ourselves with a bit too much product and only a limited market," Wilton said.

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On the Net:

Prairie Oat Growers Association: http://www.poga.ca/

North American Millers' Association: http://www.namamillers.org/

General Mills Inc.: http://www.generalmills.com/

Woody's Performance Horse Feeds: http://www.woodysfeed.com/

N.D. Agriculture Department: http://www.agdepartment.com/

Ag Commodity Research: http://www.oatinsight.com/

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