A dramatic decline in the UK oat harvest has forced processors to raise prices and place forward contracts with growers for the first time, to guarantee supplies.
Martin Parry, group sales manager for Centaur Grain, blamed three consecutive years of poor prices and common agricultural policy (CAP) reform in the European Union for a potential shortfall this year. "It is possible that the supply and demand equation will not balance," he said.
European Oat Millers and Morning Foods have both placed contracts as far ahead as 2007 to protect their supplies.
The Bedfordshire-based European Oat Millers said: "We are likely to struggle this year. There are enough oats in the ground if we don't export, so we are focusing on getting grain merchants to put it in store or put it on contract for us, so there's not the opportunity for it to get outside the country."
Clean oats are predicted to trade at around £80/t delivered and farmers are looking for £70/t on contract. The 2005 harvest could be as low as 400,000t -- a third less than in previous years.
"With the new farm policy, farmers are wanting to know that they are going to get a guaranteed price for the crop in the ground or they won't bother growing it," said European Oat Millers. "That's where we have come unstuck. Perhaps we didn't act soon enough to get the growers on board."