This week, a 500g pack of standard own-label porridge oats cost an average of 69p across the major multiples compared with 43p this time last year [BrandView.co.uk]. The average price of a selection of 44 porridge products (own-label and branded) stocked by the multiples was 10p more than a year ago.
And further price hikes could be in the offing. On the world markets, oat prices have already surged 75% year-on-year to an average of £175/tonne, exceeding even 2008 prices during the height of the global food crisis [Mintec].
Martyn Gray, marketing director at oatcakes maker Nairn, which does not buy on the spot market but secures oats on contracts, said his company was paying 20% more for oatmeal than it did last year, and it was likely the increases would be passed on to consumers. "We will be looking to feed an element of the increases through, although you can, of course, never tell exactly what the retailers will decide to do."
Experts blamed the price rises on a 15% year-on-year slump in global oat production to 20.2 million tonnes, compared with 23.8 million tonnes in 2009 [SAC Consulting]. Production in the EU, the world's biggest oat-producing region, is down from 8.5 million tonnes to 7.6m tonnes, with Russia, Canada and Australia also reporting falls in output.
According to Julian Bell, senior consultant at SAC Consulting, prices were being driven up further by nervousness in the market about what oat stocks would be like next year. Whereas some sturdy varieties of wheat are able to withstand the cold and can be planted in autumn, most oats in Europe are not planted until spring. With world wheat prices offering some high returns at the moment, there was a risk more farmers than usual would have committed their land to wheat by the time the oat-planting season came round in early 2011, Bell said.
Oil crops such as rapeseed also commanded record prices and were competing for land. "It's a highly charged situation. The forward prices that farmers are asking for 2011 are quite strong as the buyers are very nervous about what will be available next harvest," said Bell.
To secure supplies and provide incentives for farmers, large oat buyers were increasingly indexing their oat contracts to wheat, which meant any further wheat price rises would be reflected in the raw material cost for oats, he added.