Oats: From the Original Energy Contract to Trendy Dairy Alternative

Oats are a crop whose history in North America is inextricably linked with the futures industry. Launched in 1877 along with Corn and Wheat by the Chicago Board of Trade, Oat futures can be considered the first energy derivative: the underlying crop served as feed for the city’s horses before the advent of the internal combustion engine.

In the United States, domestic disappearance of oats due to human consumption surpassed that of animal feed only in the last decade, as interest in the crop for food has strengthened. Oats are grown without genetic modification, require less chemical management than other grains, and demand minimal processing before being fit for retail sale. Generally viewed as a natural and heart-healthy food (thanks to a famous marketing push in the late 20^th century), oats find a place within in the American diet as consumers seek foods with minimal processing and short ingredient lists. Additionally, the rise of oat milk among dairy alternatives contributes to current demand.  

The United States is expected to produce 837,000 metric tons of oats in the 2022/2023 crop year, or 3.6% of global production, up from only 578,000 metric tons and 2.7% of global production in 2021/2022. The world’s top oat-producing countries of the past decade are the European Union, Russia, Canada, and Australia before the United States. Finland is the world’s largest consumer of oats per capita: muesli, consisting primarily of rolled oats, is a Nordic dietary staple.

The United States is the world’s largest importer of oats, consuming almost 10% of the world’s supply. Almost all oats imported to the United States come from Canada, the world’s largest exporter and a heavy consumer of the crop.

Late 2021 experienced a rally in oat prices, with front-month futures prices exceeding Corn futures prices and hovering above $6 per bushel for most of Q4 2021. Oat futures prices remained high in Q1 2022 before approaching pre-rally levels mid-year. Since mid-2022, front-month Oat futures stabilized around $4 per bushel, declining further in late 2022 and early 2023.

Oat milk, which has become increasingly ubiquitous in both coffee shops and home fridges, experienced an increase in retail sales of over 50% in the year ending June 2022, according to point-of-sale data. This figure underlies the transition of oats in the United States as primarily a feed crop, to one consumed by humans. Only 7% of domestic disappearance of oats was attributable to food, alcohol and industrial use in the 1975/76 crop year. In 2017/18 and in each marketing year since, domestic disappearance attributable to food, alcohol and industrial use surpassed domestic disappearance attributable to feed and residual use. Although some differences in quality standards exist between milling and feed-grade oats, the same fundamentals underlie both markets, and the same producers are generally capable of growing both. Some producers have looked to the guidance of local millers to make the transition.