Des Moines Register
10-10-06
Farms eschew oats; millers blame farm bill
By PHILIP BRASHER
Register Washington Bureau
Washington, D.C. - The oatmeal that may have been eaten at breakfast isn't
American anymore. Neither are the oats in that granola bar. As for Cheerios, that
most American of cereals, its chief ingredient is likely an import, too.
The oats that Americans eat are no longer grown domestically but instead come
from Canada or in smaller amounts from Europe.
U.S. farmers have all but quit growing the grain, for the simple reason that they
can make more money growing corn and other crops.
Millers blame federal subsidy programs that guarantee farmers a much higher
return for crops such as corn and soybeans than for oats, and the processors
want Congress to do something about that in the next farm bill.
"We cannot compete with the treasury of the U.S. government," said Rick
Schwein, senior vice president of Grain Millers Inc., which processes oats in St.
Ansgar, Ia.
Grain Millers, based in Eden Prairie, Minn., is spending $20 million to expand its
mill at St. Ansgar, but the oats don't come from Iowa; they're imported from
Canada.
Quaker Oats also uses imported oats to produce oatmeal and cereals at its
1,400-employee plant in Cedar Rapids.
The oats that farmers do grow in Iowa are cultivated mostly for animal feed and
as a cover crop to protect newly planted fields of alfalfa from weeds.
Iowa will harvest 9.6 million bushels of oats this year, less than one-quarter of the
state's production in 1990.
Nationally, oats production has fallen from 357 million bushels in 1990 to 107
million bushels this year, the lowest amount since the U.S. Agriculture
Department began keeping records in 1866. Imports are expected to reach 100
million bushels this year, nearly equaling U.S. production. Most of the imported
oats, which arrive from as far away as Finland, will go for food.
Oats isn't the only crop that has fallen out of favor with American farmers - U.S.
production of wheat has fallen to its lowest level since 1972 - but farmers still
grow more wheat that can be used domestically.
Minneapolis-based General Mills Inc., maker of Cheerios, normally doesn't
comment on where it gets its ingredients, but a company spokesman made an
exception on the issue of oats, acknowledging that the company has to rely on
imports.
Having to import ingredients raises shipping costs, and the Canadian dollar also
has strengthened, making the imported grain more expensive. The Canadian
dollar has gained more than 40 percent in value against the U.S. dollar since
2002.
General Mills representatives have held meetings with farmers to recruit them to
grow oats for the company, but the crop isn't an easy sell.
Hardier varieties of corn and soybeans are making it easier for farmers to grow
those crops in states like North Dakota that have shorter growing seasons.
Corn is especially attractive now that the booming ethanol industry is pushing up
demand.
Farmers have been cutting back on their oats acreage for decades, well before
the recent farm bills or the developments in corn and soybean genetics.
"To lay it all on the doorstep of the farm programs is not totally accurate," said
Mike Duffy, an Iowa State University economist.
Grain Millers will pay about $2.50 a bushel for food-grade oats at St. Ansgar,
nearly 40 cents more than the current price of corn in Mitchell County. However,
a farmer can produce more than twice as much corn per acre than oats.
After paying for seed, chemicals and other expenses, farmers netted an average
of $197 per acre on corn in 2004, including subsidies, according to the U.S.
Agriculture Department. An acre of oats, by comparison, earned $39 an acre that
year.
The North American Millers Association, whose members include Grain Millers,
General Mills and Quaker Oats, a subsidiary of Pepsico Beverages and Foods,
wants Congress to take several steps to encourage farmers to grow more oats.
Among the ideas:
- Spend more money on yield-boosting research.
- Return to cultivation some of the 36 million acres of former cropland now idled
under the Conservation Reserve Program.
- Reduce the disparity in subsidy rates between oats and other crops. Farmers
receive subsidies when the market price of a crop falls below a fixed price, or
loan rate. The loan rate for oats is $1.33 a bushel, compared with $1.95 for corn.
Reporter Philip Brasher can be reached at (202) 906-8138 or
pbrasher@dmreg.com