Category: Arable

Grain Market Update

The global grain market is tighter in the latest United States Department of Agriculture (USDA) World Agriculture Supply and Demand Estimates (WASDE).  The forecasts, published on 10th December, reduced global grain stocks by more than six million tonnes.

The tightness in the grain market comes from the maize and wider coarse grains market, where demand increased by almost nine million tonnes.  The wheat stock position increased marginally, despite a fall of two million tonnes in production.  The picture for global grain supply and demand is still not set with harvest due in the Southern Hemisphere.

Alongside the tighter supply and demand outlook, trade reports suggest a tightening of Black Sea grain availability in 2025.

The tighter supply and demand outlook is increasing in global grain prices.  Paris wheat futures (May 2025), often a good benchmark for UK grain prices, have increased by more than €20 per tonne since the beginning of December.  Despite the increase in wheat prices on the continent, UK prices are flat over the same period.  A strong Sterling/weak Euro has undermined the ability of UK cereal prices to rise.  UK wheat futures (May-25) were up by only around £5 per tonne over the same period.  However, the value of oilseed rape has increased significantly in the UK over the past month.

In December, the value of Sterling against the Euro hit the highest point since the EU Exit referendum on 23rd June 2016.  It is arguably a case of a weaker Euro than strong Sterling with a series of political challenges, notably in Germany and France weaking the single currency.  The relative strength of the Pound makes importing grain from the continent cheaper and undermines the price of UK cereals.  Similarly, it also makes purchasing imports from the EU cheaper.

Imports have been a big part of UK grain supply and demand this season, due to tight domestic availability.  In the season to October 2024, wheat and maize imports have totaled more than 2 million tonnes, 50% higher than the 5-year average.

The AHDB published its Early Bird Survey results this month, with regional forecasts of crop areas.  The survey shows a 5% increase in the winter wheat area to 1.61 million hectares. The survey captures data up to November 15th, subsequent improvements in conditions may have resulted in an increase in area since that point.

Crop Areas & Yields

Defra has released the provisional summary of UK crop areas and combinable crop yields for harvest 2024.  The results confirm what a difficult year at has been for growers.  The latest figures show a decline in both the UK wheat area and yield resulting in a 20.3% reduction in grain production for 2024, at 11.15 million tonnes.

Total barley production is up on the year.  This is driven entirely by an increase in spring barley grown (+18.7%), as producers were unable to grow winter crops because of the wet autumn.  However, even with a 5.1% increase in area, the increased proportion of spring barley resulted in a 3.1% decline in average yield and total production was just 1.8% above year earlier levels at 7.1 million tonnes.  Oat output was up, with an increase in area, again as a result of growers switching from winter to spring crops and also a better yield than the previous year, although still not back to historic levels.  Growing OSR remains challenging, and the area has now fallen below 300,000 hectares; yields were also down resulting in a total UK production of just 823,000 tonnes, -32.3% compared with 2023.  Other significant changes on the year were combining peas, with the area planted up by 46%, another ‘winner’ as a consequence of the difficult autumn.

The table below summarises the data –

Loam Farm Latest

Following harvest 2024, we have updated the figures for our Loam Farm model.  This shows low profits from the previous cropping year.  In addition, the outlook for 2025 is not great.

Loam Farm is a notional 600 hectare business that has been used since 1991 to track the fortunes of British combinable cropping farms.  It is partly owned and partly rented and is based on real-life data.  It has one full-time worker and employs harvest casual labour.  It grows a range of cereals crops and has entered into an SFI agreement.  The table below provides a summary of the last three harvest years, and a budget for harvest 2025.

The farm is completing its grain sales from harvest 2024.  it has less to sell than average due to reduced yields – a result of the wet weather through the autumn of 2023 and spring of 2024.  Coupled with unexciting prices this means the output of the farm is reduced – some 35% on the 2022 harvest year – although it must be noted that this was an unusually good year.  Although variable costs have fallen, overheads have climbed.  This has resulted in a loss from production.  This year’s residual Basic Payment and the SFI the farm has entered offset this shortfall, but there is a low level of overall farm profitability.

We have commented before about the variability of results from harvest 2024.  Loam Farm is simply an illustration.  Some businesses will have had an ‘OK’ year (although very few are likely to have had a ‘good’ year).  But, equally, some combinable cropping farms will have fared worse than Loam Farm and are facing significant losses for the past year. 

Turning to the budget for harvest 2025, output is forecast to recover somewhat.  This is largely due to yields reverting to average rather than any firming in prices.  Loam Farm has managed to establish its crops this autumn despite some testing conditions.  With costs not changing greatly, profitabilty from production improves so that there is a positive return.  The sharp drop in the Basic Payment for 2025 can be seen – this is a result of payments being capped at £7,200 per farm.  Previously, Loam Farm was budgeting on BPS income of £58 per hectare.  The SFI income has risen as the farm has added some new SFI2024 options.  It shows how important this income stream has become to overall profitability.  

Grain Markets

Farmers might have hoped that the small UK grain harvest would support prices.  However, it must be remembered that UK prices are largely determined by the global market.  Furthermore, the UK seems to have already imported enough grain to make up for the shortfall at harvest 2024.  In July to September, UK imports of wheat were nearly 900,000 tonnes, plus 640,000 tonnes of maize.  The high level of wheat imports includes Canadian and other origin high protein wheat, which is eroding milling premia.

Some support has been seen for grain prices towards the end of November, driven by the increased tensions surrounding the use of western weapons in Russia.  However, prices still remain subdued relative to the levels seen in recent years.

Prices of oilseed rape have responded to restricted availability of oilseed crops at the global level.  The International Grains Council (IGC) estimated in November that the supply and demand of soyabeans has tightened relative to earlier estimates, although stocks are still expected to increase year-on-year.  This, coupled with estimates of smaller oilseed rape crops in key growing regions of Ukraine, Europe and Australia, has lifted prices.  Values can be seen in Key Farm Facts.

One factor which had been supporting European pricing of oilseeds was the impeding EU Deforestation Regulations, which have been cast into doubt with EU Member States voting for the introduction of ‘no risk’ zones which will be extempt from regulation.

Crop Areas 2025

The wheat area is forecast to increase by at least 5% for harvest 2025.  This follows last year’s rain-affected reduced acreage.  Figures from AHDB’s Early Bird Survey show a potential acreage of 1.61 million hectares of wheat.  The survey is based on a snapshot in time, and dry weather after returns may have led to further increases in area, up to 1.7 million hectares.

The big ‘loser’ in cropping this year is oilseed rape.  Increased growing risk and poor returns has resulted in growers turn their back on the crop.  United Oilseeds forecast the area planted in the UK this winter at 215,000 hectares, a 40-year low.  The reducing crop area has prompted an industry group led by United Oilseeds to launch an ‘OSR reboot’. The relaunch is aimed at increasing confidence in the crop.  This, in turn, aims to increase the ability of UK farmers to satisfy domestic crush demand (around 2 million tonnes).

Revised Early Bird Survey figures will be available in December.  These will incorporate the final UK June Census figures and further survey returns for later plantings this autumn. 

Grain Market Update

The 2024 harvest of wheat in the UK has been pegged at 11.1 million tonnes.  This is down 20% from the 2019-2023 average of 13.9 million tonnes.  This overall production figure masks regional variability in both planted area and yields for 2024.  The wet weather that plagued last year’s crop will have wide-ranging implications across regions and individual farms.  Cashflow of some businesses is likely to be challenged with less tonnage available to be sold and ex-farm feed wheat prices only £6 per tonne higher than October 2023, at £183 per tonne.

The cumulative effects of last season’s rainfall and the wet autumn this year are driving concerns about the 2025 crop.  Met Office data for September suggests that much of England received 200% of the 1991-2020 average rainfall for the month.

The wet weather of last season and this has led some to alter establishment for this year, dusting the cobwebs off the plough, and hitching up the tine drill in an effort to avoid a repeat of last year.

There is some reflection of expectations of a reduction in wheat output in 2025 in global grain pricing.  At the end of October, the value of new crop (November 2025) UK feed wheat futures was around £12 per tonne higher than nearby futures.  The cumulative impact of a tighter supply and demand of global grains in 2024/25 and challenging establishment for 2025/26 offer an opportunity for growers to lock in an early price around the £185-190 per tonne mark for feed wheat, depending on location.

Elsewhere in the world, dryness appears to be the primary concern.  There are challenges for establishment of winter wheat in Russia.  Lack of rain in the US is advantageous for the maize and soyabean harvests which are well ahead of average pace.  That said, it could check the progress of wheat planting and development.

Rapeseed prices are well ahead of year-ago levels, averaging almost £390 per tonne ex-farm across October.  Rapeseed production was down significantly in the UK, EU, and Ukraine in 2024.  Furthermore, expectations are for a smaller rapeseed area again in the UK for harvest 2025.  However, with a plentiful soyabean crop in the US and Brazil, strong availability of soyabean oil could partly erode the premium that rapeseed currently has.

Potato Update

The UK could be heading for its smallest potato crop ever because of a combination of a reduced area and difficult growing conditions.

There are no official estimates of the UK’s planted area or harvested area yet – they will not arrive until next year when Defra releases them.  In 2023, it estimated the harvested area in the whole of the UK at 98,345 hectares – the smallest ever.  Opinion suggests that there was not a decrease in area this year, with most industry-watchers putting the area at around 100,000 hectares.

The official figures for 2023 put production at 4.704 million tonnes, following an average yield of 47.8 tonnes per hectare.  A repeat of that yield would result in a 4.783 million tonne crop.  Meanwhile, the average five-year between 2019 and 2023 was 45t per Ha, which, if delivered, would mean a crop of 4.500 million tonnes, the smallest on record – lower even than the 1975 harvest of 4.542 million tonnes.  However, there are reasons to believe that the crop could be even smaller, with World Potato Markets suggesting the average yield could be as low as 43t per Ha, delivering a crop of only 4.3 million tonnes.  That compares with more than seven million tonnes in 1992.

Another wet autumn means lifting has been difficult.  At the end of October more than 20% of the crop was still to be harvested, which was similar to last year but behind previous years.  Yields are said to be very variable depending on location and rain volumes.  The lack of potatoes has supported potato prices.  Newsletter Potato Call reports maincrop prices of £300 per tonne, with best quality well in excess of that.

The lack of British potatoes increases the need for imports.  Fresh potato imports were up 75% in the year to August, but only to 145,000 tonnes, according to HMRC data.  However, a much larger volume came in as processed frozen fries, with imports at almost 850,000 tonnes, reinforcing the UK’s position as the second largest importer in the world after the USA.  Almost all those imports are from Belgium and the Netherlands.

The EU potato crop is expected to be a little larger this year than last, with a lot of that growth taking place in France which has increased its processing capacity.  Current free-buy prices there are about €130 per tonne (£108 per t) with little expectation there will be similar increases to last year that saw values jump to €600 per t (£500) by the end of the 2023/24 season.

British growers may not increase their potato areas significantly in 2025 despite the support of good prices, because of the continued high cost of production, consolidation to those growers with adequate machinery and storage, and continued challenging weather conditions.

Combinable Crop Market Outlook

Global Position

With results from the Northern Hemisphere harvest (which accounts for about 80% of the global grains harvest) now becoming available, forecasts of global grain supply and demand are being refined with some actuals.  The latest figures from the International Grains Council (IGC) are presented in the table below for the new 2024/25 marketing year (2024 harvest), alongside the last month’s figures.

World Grain Supply and Demand – source: IGC
Marketing Year –

UK harvest –

 21/22

2021

 22/23

2022

 23/24

2023

 24/25 (2024)

Aug       Sept
m tonnes WHEAT
Production 780 804 795 799 798
Usage 784 794 807 803 803
End Stocks 274 284 272 266 267
Stocks/Use Ratio 34.9% 35.8% 33.7% 33.1% 33.3%
Stocks: Main Exporters 62 70 63 59 61
m tonnes MAIZE (CORN)
Production 1,222 1,163 1,227 1,226 1,224
Usage 1,213 1184 1,223 1,229 1,230
End Stocks 298 277 281 277 276
Stocks/Use Ratio 24.6% 23.4% 23.0% 22.5% 22.4%
Stocks: Main Exporters‚ 56 47 54 58 57
m tonnes SOYABEANS
Production 357 376 393 419 419
Usage 360 369 385 406 406
End Stocks 54 61 69 82 82
Stocks/Use Ratio 15.0% 16.5% 17.9% 20.2% 20.2%
Stocks: Main Exportersƒ 18 16 19 29 28
22/23 figures estimates; 23/24 forecasts   Argentina, Australia, Canada, EU, Kazakhstan, Russia, Ukraine, US    ‚ Argentina, Brazil, Ukraine, US    ƒ Argentina, Brazil, US

 

It shows that the total wheat and maize production estimates are not changing vastly overall as the various nations’ harvest figures are counted up.  However, within the figures, the European crop is declining and the US, Australian and South American crops are being revised upwards.  This makes marginal overall change but advantages the European markets with additional surpluses further away from our markets; making them dearer to ship to here.  Meanwhile, soybeans have not changed month on month.

Total global grain production estimates now sit at 2,315 million tonnes, or 2.3 billion tonnes.  This is the largest crop the world has ever produced.  We should not be surprised or impressed with records, as demand rises annually with more mouths to feed and ever-hungrier consumers.  Despite harvesting more than ever before, stock levels are likely to decline this year as consumption rises have outstripped production increases.  Yet, the ability of our industry to provide sufficient should year-on-year should offer food for thought for those expecting imminent mass starvation because of resource loss.  It might happen, but it is clearly not inevitable.

Domestic Situation

The combinable harvest 2024 is now all-but complete in the UK – apart from some areas in the far north, and some later-harvested spring crops including beans and linseed.  Harvest progress has slowed in the last week, with the heavy rain having hampered growers’ combining.

Overall yields for winter cereals and oilseeds are lower than average – but, it appears, by less than most people anticipated back in, say, March.  Nature, once again has compensated remarkably well since the appalling winter weather; of course with the help of agronomists and farmers.  Harvest performance, in terms of yield and quality variation is inevitable each year, but this year, the ranges in both are unsurprisingly greater than usual.  Spring crops have faired better, with both yield and quality, especially in the North of England and Scotland.  Some spring crops such as spring malting barley are likely to be the best performing combinable crops financially this year on many farms.

The unexpected and extreme weather conditions will have disadvantaged some farmers more than others, meaning those who usually excel may not stand out from the crowd this year, and indeed, bank managers and farm advisors might see cash issues with farms that are usually very safe, whilst others are relatively unaffected.

Over the last 31 days, the November 2024 (new-crop) wheat futures contract has fallen by £5 per tonne, and is now close to its contract low set in March.  This is despite a rise since then of £47 per tonne, followed to a £45 fall.  Previous Editions of this Bulletin have reminded the reader that prices of grains in the UK are not set by local supply and demand, having such a small proportion of the global production and trade.  Having a small UK crop is not a very bullish factor on the scale of things.  Whilst the 2024 crop price has swung so much since spring, the value of 2025 wheat has shifted far less, being £2 per tonne dearer when prices fell, the £12 per tonne cheaper when they rose.  It is now back to carrying a £14.40 premium over 2024 crop prices.

Feed barley has outperformed feed wheat this month, with its discount now smaller than it was at the end of August.  However, it is now dear on a global basis which suggests lack of exports might soon curtail additional price rises, especially as the UK does have an exportable surplus.  Demand has picked up by compounders and pushed more value into barley than wheat.  Malting barley premiums are slimming as it emerges the harvest, especially in Scotland is better than previously expected – being a smaller and more domestic market, the malting barley market is more localised than wheat.

Half of the combinable pulses are still in the field and may have been affected by the recent very heavy rains.  Samples from other countries are showing insect damage, so potentially leaving opportunities for our pulses if they are clean and bright.  It may be prudent to reflect on marketing them before the Australian harvest arrives in the New Year, which is likely to be clean.

Arable Update

As harvest progresses in the UK, grain prices have continued to slide.  The value of UK November 2024 UK feed wheat futures reached the lowest point for the contract since March 2024, although spot prices remain ahead of those levels.  The full picture for grain, oilseed and pulse prices is shown in Key Farm Facts.

The Andersons Centre has been carrying out harvest reporting for AHDB throughout the course of the summer.  The latest harvest report was published on Friday 16th August.  This showed that the wheat harvest was 37% complete; significant progress has been made in the week since then and is now nearing completion in much of Eastern England and the Midlands.  Wheat yields so far are 7% down on the five-year average across the UK.  There has been significant regional variation, with yields generally better for winter crops in East Anglia, and poorer in the Midlands.  This is perhaps not surprising given the challenges during planting and crop development this season.

Spring crop harvesting is also well underway across much of England.  Early signs suggest that spring crops are performing better, comparatively, than winter crops.  Yields and grain sizes have been promising and malting quality of barley samples has been good.  The lack of sunlight through crop development has led to low levels of nitrogen.

While low nitrogen is good for malting barley, the same cannot be said for milling wheat.  Low protein content has been a feature of milling wheat samples.  This has led to continued strength in milling premiums.  That said, poor protein is more manageable for millers than last year’s Hagberg quality challenge as it can be blended to acceptable levels. This may result in a fall in premiums through the season.

The direction of global grain prices is driven by the balance of global supply and demand.  The United States Department of Agriculture made unexpectedly large upward revisions to maize and soyabean production estimates in August.  The trade had expected increases of 0.75% and 0.05% to soyabean and maize production, respectively.  The USDA increased their forecasts by 3.48% and 0.29%, respectively.  The size of the change is relatively small but, being greater than traders expected, led to a decision to sell more, leading to a fall in prices.

Domestically, pressure is also coming from increased grain stocks which have been carried through harvest.  On-farm stocks are estimated at 1.16 million tonnes and more than 1 million tonnes of merchant, ports and co-operative stocks.  According to AHDB this figure is 89% above the five-year average level.  This reflects both the expectation of a smaller 2024 by the trade, and also the direction of prices this season leading to a lack of farmer selling.

Beet Price for 2025

British Sugar and the NFU have agreed a headline price of £33 per tonne for the 2025 sugar crop (2025/26 marketing year).  This is £7 per tonne lower than the price paid for both the 2023 and 2024 seasons.  It reflects lower prices on sugar commodity markets.

Growers will be able to sell up to a maximum of 70% of their contract tonnage entitlement (CTE) at the basic price of £33.  There are two further contract options;

  • a base price of £30.70 per tonne with a market-linked bonus paid on top
  • a contract linked to the sugar futures price (limited to 50% of CTE)

Growers can also opt into a Yield Protection scheme which pays £31.60 under the fixed-price option and £29.30 for the market-linked option.  Frost insurance is also offered.  The calculation of the Late Delivery Allowance is unchanged.

The usual CTE performance rules will be relaxed for 2025.  As long as growers deliver 70% of their tonnage next year, they will not be penalised with any CTE reductions.  This seems an ackowledgement that growers may want to reduce their acreage given the lower price.  Most beet growers will have been expecting a beet price reduction given the slide in sugar values.  However, the scale of the drop is likely to be a surprise.