Oat Prices Reach Record Highs, Economists Aren't Convinced It'll Eat into Corn and Soybean Acres
U.S. Farm Report 10/30/21 - Roundtable 1
Oats and wheat have been the superstars in commodity prices lately. As oats hit a new record high this week, spring wheat traded to the highest level since 2012.
“The market always gets excited and usually overshoots somewhat, but the whole thing behind this is the fundamentals,” Jim Hilker, professor emeritus at Michigan State University. “Think about where oats and barley and those types of things are grown. They're grown in the same areas where we had a lot of drought. And they also had planting problems. So acreage was down, yields were down.”
He says it was a similar story for wheat. Spring wheat hit $10 last Friday. And as demand remains the big question for prices moving forward, one economist thinks the demand for U.S. grains is still robust, even in countries like China.
“I do think we'll see sustained demand for some of the U.S grains in China,” says David Ortega, food economist with Michigan State University. “They built back their hog herd after was decimated from African Swine Fever (ASF). But what's been really unique about China is that the outbreak of ASF has changed their production method.”
Ortega says when he started traveling to China in 2008, the hog herd in China mainly consisted of backyard herds, which were prone to disease and other issues.
“Now, we're seeing very large operations,” he says. “You hear these pig hotels popping up with 10,000 animals, and they're really relying on grain, and a lot of that grain has come from here in the U.S. So, I do see that being sustained, but it's not going to be as high as we saw earlier in the year when they were building back that hog herd that was cut by about half.”
Even as wheat and oat prices are on a historic price run, Trey Malone, an extension agricultural economist with Michigan State University, doesn’t think it will cause a major acreage switch in states like Michigan.
“I asked that question about what other crops we should be really paying attention to in our Ag Credit Conference this week, and honestly, most of the growers had a hard time identifying anything else,” Malone says. “So, we might see a little bit of a shift, but it's not clear to me that we're going to see this mass exodus between corn and soybeans.”
