Chicago | Reuters — Chicago Board of Trade December oats futures climbed their daily maximum of 25 cents per bushel on Wednesday, nearing a 7-1/2 hear high, after drought slashed supplies from top global supplier Canada at a time of robust demand for the grain, traders said.

The December oats contract surged 25 cents to settle at $5.57-3/4 per bushel, just under its contract top set last week at $5.64, the highest price on a continuous chart of the front contract since March 2014 (all figures US$).

CBOT March oats also rose the 25-cent limit on Wednesday, and May and July oats set life-of-contract highs. Daily limits will widen to 40 cents for Thursday’s session, the exchange said.

Canada is the world’s largest exporter of oats, for which demand has increased as oat milk gains in popularity and as the COVID-19 pandemic has driven consumers toward healthier grains, said Randy Strychar, president of Ag Commodity Research and Oatinformation.com.

However, drought cut the size of Canada’s 2021 oat harvest to 2.6 million tonnes, down 43.6 per cent from the previous year, Statistics Canada said this month.

“We have kind of reached the point where we simply don’t have enough oats,” Strychar said, adding that demand from the food sector is pricing oats out of the animal feed market.

“Commercial companies are going to have to pull every single oat off-farm that they can, and then you are going to have to import some,” Strychar said.

Higher prices will help oats to compete for acres in 2022 with spring wheat in western Canada, Strychar said. CBOT wheat and corn futures also closed higher on Wednesday.

“You are going to have to hold oat prices up versus other grains and oilseeds to get the farmers to grow more oats. Otherwise we are going to just repeat this next year,” Strychar said.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago.

For more content related to drought management visit The Dry Times, where you can find a collection of stories from our family of publications as well as links to external resources to support your decisions through these difficult times.