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Southern Minnesota oats marketing group sprouts amid search for third crop

A group of a dozen farmers are pooling their resources to better market their food-grade oats. The group hopes to build up to 1 million bushels in the coming years.

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Martin Larsen harvested these oats in 2022 at his farm near Byron, Minnesota. Larsen is part of a marketing group that has developed in the area.
Courtesy / Martin Larsen
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BYRON, Minn. — What started out as some southeast Minnesota farmers discussing conservation practices has evolved into a marketing group for food-grade oats.

The group of farmers in the Byron area, just outside of Rochester, started looking at a third crop to add to their corn-soybean rotation and started seeing some success as well as better corn yields.

The oat acreage is still pretty small, but with a dozen farmers pooling some resources and know-how, they are growing enough oats to help supply a processing plant in the region needing food-grade oats.

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Martin Larsen of Byron, Minnesota, talks Dec. 15, 2022, in Waite Park, Minnesota, about adding oats to his corn and soybean rotation. Larsen was presenting at a Soil Management Summit.
Jeff Beach / Agweek

Martin Larsen, of Byron in Olmsted County, said the group doesn’t even have an official name yet.

“We're still in the beginning stages of really making something out of this in the next few years,” Martin said. “But we went from nothing, two years ago — not organized, just individuals working on our own — to aggregating 1,000 acres last year.”

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A key piece of equipment for an oats marketing group in southeast Minnesota has been a grain cleaner to help improve test weight to ensure that the crop can meet the food-grade standards.
Courtesy / Martin Larsen

A big break has come with working with a non-profit organization that has helped provide funding for a key piece of equipment — a grain cleaner to help meet the standards of food-grade oats.

They also have lined up use of a grain-handling facility for blending oats and centralized shipping.

“So really the speed at which it's moving is pretty impressive, but yet calculated enough that we're not going to go off the rails with it,” Larsen said.

Martin said the group would like to grow to 1 million bushels in the next five or 10 years, which will mean adding more members.

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Tom Pyfferoen stands in one of his crop fields in northwest Rochester on May 3, 2021.
Noah Fish / Agweek

Another one of the current members is Tom Pyfferoen of Pine Island.

He started growing oats on fields near some pasture for his beef cattle. After the oats are harvested in the summer, he planted clover as a cover crop and some more acres for his cattle to graze or maybe some extra hay.

But he was surprised at how good some of his oat yields were, with the added benefit of much better corn yields — he said an extra 20 bushels per acre for the first couple of years after being planted to oats.

He said oats was “something to kind of spread the workload,” with low input costs and a way to improve the soil health on some of his more challenging fields.

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He said the marketing group may have 2,000 acres in 2023, producing about 200,000 bushels.

Top oats producing states
The top oats producing states for 2022, in bushels:
  1. North Dakota: 13.49 million
  2. Minnesota: 8.26 million
  3. South Dakota: 6 million
  4. Wisconsin: 4.81 million
  5. Iowa: 3.2 million
Source: National Agricultural Statistics Service

Once popular in the upper Midwest, oats acreage has shrunk over the decades, and most local elevators don’t generally deal with oats.

But oats have been on the upswing in the last decade. In 2022, the U.S. Department of Agriculture estimates that oat production was at 57.7 million bushels, up 45% from 2021. Yield was estimated at 64.8 bushels per acre, up 3.5 bushels from the previous year. About 890,000 acres of oats were harvested, 37% above the previous year.

New for oats growers in 2023 is revenue protection through the USDA's Risk Management Agency. Previously, oats were insured under the Actual Production History plan of insurance.

The upper Midwest still leads the U.S. in oats production but most oats are grown in Europe and Canada, with the U.S. as a huge export market for Canadian oats.

Getting contracts

But those U.S. oat buyers will buy more locally sourced oats.

Pyfferoen said now that the group has some critical mass, the oat processors are coming to the table and offering some good contracts.

“But it’s not a contract that every grower out there can handle because he doesn't have the infrastructure,” Pyfferoen said.

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But with storage, a grain cleaner, shared trucking and some shared fieldwork, the group can fill orders with more confidence.

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Oats were being combined near Byron, Minnesota, in 2022. Martin Larsen helps combine some fields for other members of an oats marketing group in southeast Minnesota that has formed in the last couple of years.
Courtesy / Martin Larsen

Larsen, who in 2022 helped combine some of the oats for his neighbors, said the other resource that the group shares is information about how to grow oats.

“Most haven’t grown oats in a long time,” Larsen said, adding that they can share information from the tractor or combine about what they are seeing for crop and field conditions.

The key grading factor for oats is test weight, with the target being 36 pounds per bushel.

If a member of the group has some oats that are a little light, cleaning them or blending them with another grower’s heavier harvest can help reduce the marketing risk.

The grower with the light oats would still have to take a discounted price, but better than having the crop go as livestock feed.

“It’s still protection,” Larsen said.

The prospect of having to solve the light test weight issue as individuals “is usually pretty grim,” Larsen said. But the marketing group changes that.

“This actually gives some assurance — and quite a lot of it — that you're still going to have something of value that can be brought up to a standard, a high standard, that can be marketed in the food-grade market. And that's the game-changer part of working as a group,” Larsen said.

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Jochum Wiersma of University of Minnesota Extension, talks Dec. 15, 2022, about adding small grains into a corn and soybean rotation. He was speaking at the Soil Management Summit in Waite Park, Minnesota.
Jeff Beach / Agweek

'Recreating history'

Jochum Wiersma, a small grains specialist with University of Minnesota, said the group is “recreating history from a 100 years ago” when farmer-owned cooperative elevators helped pool their marketing power.

He said the lack of a market is a “very large hurdle when you want to reintroduce crops,” Wiersma said.

With no local aggregation, farmers are at the mercy of the processor.

“There’s all kinds of markets out there. It's just the fact that individual growers with just a couple, 2- 3- 4,000 bushels or 5,000 bushels don't have the opportunity to capitalize on it,” Pyfferoen said. “But if you come together as a group, you have the opportunity to benefit all.”

Companies that need food-grade oats include giants like Quaker Oats and Minnesota-based General Mills, the maker of Cheerios, which also has facilities in Iowa.

Quaker says its site in Cedar Rapids, Iowa, is the largest milling facility in the world processing over 2 million pounds of oats daily.

Others include oat milk companies Oatly and Sunopta.

GOLDEN VALLEY, Minn. -- General Mills on March 4 announced it will expand regenerative agriculture practices on 1 million acres by 2030. The company is starting with oats grown for Cheerios, Annie's Cascadian Farm, Nature Valley and Blue Buffalo ...

Sunopta in October 2022 broke ground on a $25 million, 252,000-square-foot warehouse in Alexandria, Minnesota. That follows a $26 million investment in 2020 in the Alexandria facility that makes oat milk.

Eric Deblieck works out of the Twin Cities as the director of crop sciences with Grain Millers, which has facilities in Minnesota, Iowa and Wisconsin.

He said the milling plant at St. Ansgar in northeast Iowa buys the majority of its oats from Canada, but would like to source more oats from the Midwest.

“We are always interested in working with more local growers,” he said.

Grain Millers will be shoring up contracts with growers for the 2023 season soon and then will be back in the market later in the year.

He said Grain Millers provides agronomical support to growers and said selecting varieties with good disease resistance, especially in more southern, warmer areas like southern Minnesota and Iowa.

“We provide assistance when and where we can,” Deblieck said. “If they’re successful, they’re going to continue to grow oats and that’s a good thing.”

For Larsen, finding the food-grade oats market has changed the way he thinks about his farm.

"I use to say that we were a corn and soybean farm, but now corn, soybean and food-grade oats — a three-crop rotation."

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U.S. Department of Agriculture, National Agricultural Statistics Service

Reach Jeff Beach at jbeach@agweek.com or call 701-451-5651 (work) or 859-420-1177.
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