Organic Food Finland blog

Where are the organic oats?

Oats seems to be a prime example of the organic commodity market with its ups and downs. Finland is the biggest organic oats producer in Europe and also the country with the biggest oversupply. This year however the product just isn't there. Why? The strong growth of the organic acreage in the 90's in Finland was largely driven by subsidies. 40% of that acreage is cereals and the most imortant cereal is oats, which is very well adapted to Finnish soil types and the Finnish climate. So Finland had a big surplus of organic oats and became a big exporter. As a consequence farm gate prices were very low until 2005/06. Those prices were not profitable for the farmers so many pulled out: the acreage of organic oats in Finland decreased by 3000 ha. Partly permanently with farmers going back to conventional - partly as a shift within organics. On top of the decreased acreage came last summers extremily warm and dry weather. Yields were 15-20% less than normal, but even more importantly some farms harvested almost no milling quality oats and the proportion of shrinked grain is very high. Flake yield in milling is very low. These factors together result in only c 50% yield of milling quality organic oats compared to normal situation. The situation is of course catastrphic to those companies who are committed to exporting organic oat products. Every stone is turned to find the remaining oats. F.ex. Helsinki Mills has offered animal-farms to change their organic oats into conventional fodder (many organic farms do not market their animal products as organic).

What will happen next? Prices are increasing to extremily high levels and contract prices for the 2007 crop in Finland will be at a substantially higher level than 2006. This should bring some of the lost acreage back but those farmers who have gone back to conventional are probably lost permanently. Certainly their will be an increase in organic oats acreage in Finland, Sweden, Germany and other countries. But also other organic grain prices - even conventional due to biofuel - are increasing so it is not so clear what will happen. In any case the market demand is strong and I believe the farm-gate prices will be 'permanently' (what ever that means) higher and farmers are safe to increase their acreages even if it means they need to convert from conventional.

But when the prices start to decrease eventually we should be careful to avoid this happening again. Farm-gate prices must be kept at a sustainable level - otherwise the same cycle will follow again.

posted by Erkki P. @ 19:07