Iowa farmers lack market for oats despite large cereal plant
DES MOINES, IA - Once the nation's leading oats producer, Iowa growers now struggle to find markets for the crop.
That's the dilemma Earl Canfield faced three years ago: He had about 3,000 bushels of oats, but no place to sell them profitably.
Quaker Oats in Cedar Rapids, the world's largest cereal production plant, does not take in oats from Iowa growers.
And most Iowa livestock operations don't include oats in the feed supply of their cattle, pigs and chickens.
With no place else to go, Canfield and his family started a business selling small batches of oats, along with their corn and soybeans, to families feeding horses, goats, cattle, pigs and chickens.
"There's a constant perception that we can't grow good oats in Iowa, because we're in the Corn Belt," said Sarah Carlson, Practical Farmers of Iowa's Midwest cover crop expert. "But we've proven that we can."
The Des Moines Register reports that Iowa has led the nation in corn production for 23 straight years, and about 80 percent of the state's 30 million crop acres are covered with either corn or soybeans.
Despite that dominance, developing markets for alfalfa, oats and other small grains could help Iowa farmers address some significant environmental problems, including degraded soil and water quality and increased weed resistance to herbicides, experts say.
Canfield said more farmers might be willing to break the steady corn-and-soybean cycle if markets for alternative crops were available.
"We've had to work hard to get around the lack of markets," the Dunkerton farmer said. "It's been a leap of faith."
Quaker Oats buys its oats from Canada, where it can find the quantity and quality the company needs, experts say.
But some other companies could be considering a shift.
Some large multinational businesses — grain, beef, pork and dairy processors — are exploring adding oats to the supply chain, driven by the efforts of large retailers like Walmart to become more sustainable.
For example, the companies want to prove to customers that their products are grown using fewer fertilizers and chemicals that can contribute to air and water pollution.
"There's interest," said Matthew Liebman, an Iowa State University agronomy professor who declined to name the companies. "I won't say there's commitment. But there's interest."
Iowa last led the nation in oats production in 1989, but by last year had slid to fifth place.
In 1950, Iowa farmers planted oats on about 6.6 million acres, a number that shriveled to 120,000 acres last year, U.S. Department of Agriculture data show. Production fell from about 271 million bushels 67 years ago to about 3.3 million bushels in 2016.
The reasons are numerous: Farmers replaced oat-eating horses with tractors to plow fields following World War II, Liebman said. And the nation turned former ammunition plants into ammonia fertilizer plants, alleviating a lot of demand for manure once supplied by the pigs, cattle and dairy cows that many families raised.
Red clover and alfalfa, often grown alongside oats, are legumes that pull nitrogen from the air and "fix it" into the soil, helping fertilize crops that follow them.
"The widespread availability of nitrogen fertilizer in the 1950s, and the increased mechanization of crop production, meant that oats for feed and legumes for fixing nitrogen ... went away," Liebman said.
At the same time, more research was poured into soybeans, another legume that adds nitrogen to the soil, and more industrial uses for soy protein and soy oil were developed, Liebman said.
"Soybeans have largely replaced forages" like oats, alfalfa and other crops, he said. "Soybean acres really came up. Corn acres haven't changed that much."
Iowa farmers planted corn this year on about 13.1 million acres, and soybeans on nearly 9.6 million acres.
Low corn and soybean prices have sparked farmer interest in growing oats, alfalfa and other crops, said Carlson, the Practical Farmers of Iowa cover crop expert.
"It's easier to talk about adding small grains to a corn-and-soybean rotation now than when we had $8 corn," she said.
Corn prices have tumbled nearly 60 percent since the 2012 high, trading around $3.50 a bushel nationally, while production costs have been slow to follow.
U.S. and Iowa farmers face a fourth year of possible losses, although USDA predicts farmers could eke out a 3.1 percent profit, largely due to livestock revenue.
ISU studies show oats typically generate less profit than corn and soybeans, but they also reduce the need for expensive fertilizers and herbicides for corn and soybean crops that follow them, putting a little more money overall — $14 an acre — in farmers' pockets after the full rotation.
Farmers can cut fertilizer costs 80 to 90 percent, said Liebman, who helped lead the long-term Iowa State research.
Adding to the benefits: Oats grown with red clover reduce soil erosion and improve soil health, establishing land that better holds water — potentially reducing flooding — and retains nitrogen and phosphorus, which can otherwise degrade water quality.
Providing full field cover, oats and red clover or alfalfa also can reduce pressure from weeds, some of which have become resistant to glyphosate and other popular herbicides.
And growers can see an increase in yields for corn and soybeans, which experience less disease. Soybeans, for example, get a 10 percent to 17 percent bump, the research shows.
Carlson said farmers can get better prices for oats when they sell them to other growers as cover crops — or to horse enthusiasts and small cattle producers as feed.
Even breaking even financially, compared to corn or soybeans, "it's a net gain socially," she said. "You've protected your soil asset, cleaned up water and provided habitat" for wildlife.
A Union of Concerned Scientists study shows that up to 40 percent of Iowa's farmland could shift to growing oats and alfalfa without disrupting markets: Neither significantly raising corn and soybeans prices — nor driving down the value of alfalfa, oats and other small grains.
But Iowa farmers would need better markets for that level of adoption, Carlson and Liebman said.
"Farmers need to be assured they could get good market prices and not have to haul the crop vast distances," Liebman said. "That market pull is essential."
Grain Millers, a Minneapolis company with a large mill in St. Ansgar, buys oats — along with wheat, barley, rye and other grains — that go into cereal, granola bars, cookies and other products.
It wants more oats from Iowa and southern Minnesota growers, said Jessie VanderPoel, who buys grain for the company.
Grain Millers recently added more storage so it could expand its local purchases, she said.
"We mill many more oats than we can buy in Iowa or the U.S.," VanderPoel said. "Most of our oats come out of Canada. ... And that's the same for any milling company."
Iowa farmers, unused to raising oats, are beginning to grow the crop with the required "test weights" — an indication of quality — that companies like Grain Millers and others want, Carlson and VanderPoel said.
"We buy some of our best oats out of Iowa year after year. It just takes a little education," VanderPoel said, adding that the company works closely with farmers interested in growing "good milling oats."
Many Iowa farmers have never grown oats, Carlson said.
"Our grandpas knew how to grow them, but younger farmers might have to relearn some stuff," she said.
"But I'm not talking about growing mangoes," she said. "It's something we have a history with. We haven't lost all our knowledge."
And geographically, Iowa farmers have advantages, potentially supplying several mills in Iowa, Minnesota and Wisconsin.
"We feel it's something that could help farmers environmentally and economically," VanderPoel said.
The Union of Concerned Scientists agrees.
It says a more diverse crop rotation could save cities and states nationwide $157 billion annually through environmental and health gains that include spending less money to clean nutrients from drinking water.
Iowa producers raise tens of millions of pigs, laying hens, turkeys and cattle each year.
But oats aren't a large part of the feed they eat, Carlson said.
Over time, they have been replaced with soy protein and distiller-dried grains — a byproduct from ethanol production — that get mixed with corn.
Re-establishing oats as a common part of livestock feed is important to build Iowa's small-grains market, Carlson said.
Here's why: Farmers who fail to raise food-grade oats need a feed market that can use their crop.
Carlson said Tyson, Smithfield and other big meat processors that call the shots on feed for Iowa livestock could make a dramatic shift in what farmers grow with even small changes.
"Companies can make that decision ... and change things overnight," she said.
In 2014, Canfield said he and his wife, Jane, began talking about ways to add diversity to their crops. "We wanted to look more long-term — beyond immediate profits and gains, to farm more sustainably," he said.
Canfield, 48, said he's had to "learn how to farm again," relying on fewer fertilizers, herbicides, pesticides and fungicides.
"We want confidence that what we're doing on the farm helps people — for our own health and those who are consuming what we're making on our farms," Canfield said.
With the introduction of oats, Canfield shifted to corn and soybeans that are not genetically modified, something that now appeals to his clients.
In Canfield's shop, he, Jane and their 18-year-old son Matthew move oats, corn and roasted soybeans through grain mills, then onto a large mixer, along with organic vitamins and supplements, before finally pouring the feed into 50-pound bags.
Not all farmers are willing to invest the time needed to market products directly to consumers, Carlson said.
Jane Canfield said her husband has spent many hours talking with customers and groups about their fledgling business. And car trips take twice as long, because Canfield stops at each convenience store along the way to leave business cards and fliers on community boards, she said.
It's paying off, said Canfield, with business doubling and tripling.
In addition to selling feed, the family sells alfalfa and oat straw for bedding and mulch.
"I've gone to being a price-setter instead of a price-taker," Canfield said.
He hopes to add cattle, pigs and other animals, selling meat directly to customers and eventually using all the grain he grows to feed livestock directly or through his customers.
Adding diversity to his crops and farm operation is the best way to provide an opportunity — and income — for his four children if they decide to join the business.
"We're doing it for them — trying to be better stewards of the land," he said.