"I CAN'T describe it any other way, the oat market is literally booming."
That was how Oatinformation president Randy Strychar, based in Canada, opened his presentation at last week's 11th International Oat Conference held in Perth.
Normally held every four years, but delayed by two due to COVID-19, the previous International Oat Conference was held in Russia in 2016.
This time around, it was Western Australia's turn, with oat industry scientists, breeders, advocates and other professionals from around the world descending on Crown Towers for the event.
During last Wednesday's plenary session on global oat markets Mr Strychar spoke of the key factors behind the oat market boom - rising awareness from consumers of the benefits of oats, record demand for oat food and beverages and expanding global oat milling processing capacity.
More than 90 per cent of oat milling takes place in six areas around the world - Canada, the United States, Chile, Australia, Europe and Russia - and significant growth was forecast in every single one of those markets.
"We have seen remarkable growth in the oat milling industry since 2010," Mr Strychar said.
"We're forecasting that by 2028 we're going to have to build one million tonnes of capacity or expansion globally and to put that in perspective, an average oat mill is about 50,000t."
The growth of the oat market in Australia, and particularly in WA, has been driven by strong demand from Asia and as a result there has been a lot of investment in oat milling capacity throughout the country and the State to respond to that.
In a subsequent presentation, CBH Group chief marketing and trading officer Jason Craig said about 95pc of oats planted in Australia were milling varieties.
"There are three or four varieties which dominate the oat market in WA," Mr Craig said.
"The Australian industry is focused on ensuring milling varieties are the key, because as a feed product, oats are starting to disappear as an alternative."
When it comes to food and beverages, oat milk was a game changer for the oat industry.
Oat milk experienced a compound annual growth rate of 9.4pc from last year to this and is tipped to experience 7.8pc growth annually over the next five years, to eventually be worth $3.7 billion by 2026.
A lot of oat milk on the market uses oat flour, which was previously a product which not a lot could be done with, but now that flour is very valuable for the oat beverage industry.
"It's a product the consumer wants," Mr Strychar said.
"They want something that is good for them and oats are viewed by the consumer as natural, healthy and safe."
MORE STORIES:
However it wasn't all positive, with both Mr Strychar and Mr Craig highlighting the declining production of the commodity as a major challenge for the industry moving forward.
According to Mr Craig, oat hectares in Australia have really started to decline over the past three years and only about 4pc of the national crop is planted to oats.
While there may be amazing demand and investment in oat milling capacity, the actual oat crop is getting smaller and the question is whether that can be rectified when wheat, barley and canola have outperformed oats year-on-year in terms of both yield and gross margins.
"Crop competition is the biggest challenge for the oat industry in Australia," Mr Craig said.
"When I speak to our oat customers, they are disappointed that prices have been going up, however in reality they haven't been going up as rapidly as the other grain commodities.
"Therefore gross margins on oats have maintained quite small compared to the other products."
On top of that, hay was previously a big export market out of Australia.
However, over the past couple of years that has struggled with China coming off and that has continued to impact the hectares of oats grown in WA.
Globally, the oat area is also an issue with less than 1pc annual growth in Europe, while in North America growth is in the negative and the hectares are declining.
That causes issues for oat millers and food companies who need predictability of supply.
"The oat area changes are too large for the growth market we are looking at," Mr Strychar said.
"You can't make a Cheerio out of barley, you have to use oats and the unpredictability of supply is hurting the industry."
Part of the problem is that the pricing model which is used for oats is outdated and probably has been for 10-15 years already.
In general, oats are still priced as a feed grain and while they are still used to feed horses and livestock, ultimately oats are now a commercial grain.
Mr Strychar said most food and milling companies would admit that's the case, but the hard part was getting it to change.
"Until we do, we're going to have a pricing problem," he said.
"Oats are not a mainstream crop anymore, they're a specialty crop or a boutique commodity and need to be priced as such."
Another issue facing the oat industry at an international level was the lack of funding for oat research, with corn and wheat receiving more input on a monthly basis than oats on an annual basis.
More locally, the disruption to the containerised export market caused by COVID has caused problems for Australia.
According to Mr Craig, Australia accounts for only about 2-3pc of the world's containers and used to have the luxury of sending them to Asia.
"The main reason being that we imported a lot of goods and there wasn't a lot being exported in containers in terms of manufactured goods, so we got very cheap prices which made us extremely competitive," he said.
"That has now dissipated and in some cases we are now at a disadvantage to places such as Europe and other markets."
