Plant-Milk Craze Has Created an Oat Bubble That’s About to Burst

(Bloomberg) -- The oat bubble is probably set to pop.

The newfound popularity of oat milk that’s sold everywhere from Starbucks cafes to Amazon.com has turned the cereal plant into a hot commodity, and profits are soaring for growers. Now, farmers are undertaking a planting bonanza that will boost acres to the most in over a decade.

While consumption is robust, that expansion in planting will probably outstrip annual growth in export and milling demand. The pending glut could cause prices to collapse, said Randy Strychar, president at Vancouver-based Oatinformation.com.

“You’re going to drive prices down,” Strychar said. “Once the seed gets in the ground, I’d say April, May, you’ll begin to see some declines.”

For vegans, it means cheaper oat milk and oatmeal could be on the horizon. Oat futures for May delivery in Chicago have risen 16% from a low last year. Growers in Canada, the top exporter, will boost acres by 9% to the most since 2009, according to a February report from the nation’s agriculture ministry.

“The net profit is a lot easier to pencil on oats than it is for anything else,” said Henning Wubbe, a farmer in La Riviere, Manitoba, who is doubling oat acres on his farm to 650 acres. A U.S. buyer has already agreed to purchase 80% of that future harvest.

A fervor for oat milk at independent coffee shops in the U.S. has led to supply shortages in recent years, and beverage companies have raced to launch their own brands, with even traditional milk companies joining the fray.

Oat-based ice creams and yogurts have followed. The alt-milk won over consumers with its creamy texture that imitates real milk better than its nut and soy-based competitors. Baristas have praised it as a tool for great latte art. Besides dairy alternatives, demand is also coming from farmers adding it to animal feed.

To contact the reporters on this story: Jen Skerritt in Winnipeg at jskerritt1@bloomberg.net;Michael Hirtzer in Chicago at mhirtzer@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Lydia Mulvany, Pratish Narayanan

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