Case Study: Value Added in the Oats Industry in Alberta and Western Canada 1998

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  • The processing of oats to some higher valued product before it is either sold locally or exported is an example of a value added activity. There are many potential uses for oats and many products that can be processed from oats, making it a good starting point when exploring value added in the agri-food and fiber industry in Alberta. Consulting studies have stated that, \"The Alberta food and fiber sector operates at the lower end of the value chain\" (Toma and Bouma, 1996, executive summary). The objective of this study is to identify and evaluate potential value added opportunities concerning the oats industry in Alberta and western Canada. Value added, as defined by the Dictionary of Business and Economics, is the difference between the price of purchased raw materials and the products final selling price. As a related example we can think of an oats milling facility that sells $130,000 in finished product (Pony oats) and to make this product it has to buy $100,000 in raw oats. We can see that this milling facility has added a value of $30,000. It is important to understand tht this is not a profit concept but is solely based on the difference between the value of a product before and after processing. This paper examines value added activity not just for one company but for the oats industry as a whole. Consistent with Toma and Bouma's (1996) approach in their review of value added in the agri-food and fiber industry in Alberta, it is appropriate to look at value added on a broad scale using an industry perspective. As Toma and Bouma described it in Changing Courses (1996), value added on an industry scale \"is not conceptually difficult. Yet in reality it is enormously difficult\" (page 103) Toma and Bouma (1996) had three recommendations for value added in the agri-food and fiber industry in Alberta: 1) Create an overseeing corporation to enhance calue added activity in view of industry objectives. 2) Alberta must be a leading food producer in order to the agri-food and fiber industry. 3) Review any regulation that may be impeding the progress of value added in the Alberta agri-food and fiber industry. These recommendations for the agri-food industry as a whole may not be the best way to increase value added in the Alberta oats industry. Due to the relatively small quantity of oats that are marketed, an overseeing corporation would likely only focus on oats as one component of their operations. This may result in a problem where the interests of adding value to oats in Alberta is compromised by increased attention and emphasis given to other bigger industry areas such as wheat and barley. The second recommendation also may not apply in the oats industry because of the location of the consumption market. Alberta, although a large producer of oats, has a small domestic market for food products and thus may have trouble competing with those producing food products closer to the consumption market. The third recommendation applied to the oats industry would be useful for adding value to oats in the area of nutraceuticals and functional foods. In this paper, historical background is provided through an explanation of historical oat acreages, prices and yields. Trends for these historical data sets are analyzed graphically and staitistically. Historical policies and markets for Alberta and western Canada are evaluated in an effort to determine how the oats industry has worked in the past. Trends in oat utilization of Canadian oats are presented covering the last fifty years. A general description on the processing of oats is supplied to identify opportunities for value added processing. Finally, industry representatives are contacted for their perspective on the oats industry and market. Processors, suppliers, government representatives and association representatives are contacted and asked questions relating to value added in the Alberta oats industry. Based on the background, current and forecasted situations, conclusions are given on the potential for value added activity in the oats industry in Alberta and western Canada.

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    Attribution-NonCommercial-NoDerivatives 3.0 International