Category: Arable

Seasonal Workers Scheme

The Seasonal Agricultural Workers Scheme (SAWS) will continue for 2022 with the same number of places as last year.  However, it will then taper down in 2023 and 2024 and disappear completely by 2025.  The Government states that the sector needs to ‘focus on the domestic workforce’ and that ‘more must be done to attract UK workers through offering training, career options, wage increases and to invest in increased automation technology’.

There will be 30,000 visas available next year (the same as 2021), but this will be kept under review with the potential to increase by 10,000 if necessary.  The scheme is also being extended to the ornamental sector – previously it was only available in ‘edible horticulture’.  From 2023 the numbers will start to phase-down, although no details are provided on actual places available in 2023 and 2024.  The scheme is now named simply ‘Seasonal Worker’ as it was extended to cover pork butchery and lorry driving. 

This announcement has angered the fresh produce sector.  Not simply because it came out on Christmas Eve which gave the impression the Government wanted to hide it.  The statement that the sector simply needs to work harder to recruit staff from the UK illustrates a lack of understanding of both the labour markets and the economics of the fresh produce sector.     

2021 Harvest

Defra has released final production figures for the 2021 harvest.  These are not very different from the provisional ones we reported on in October.  The table below sets out the changes, along with a comparison with those from previous years.

The full statistics can be found at – https://www.gov.uk/government/statistics/farming-statistics-final-crop-areas-yields-livestock-populations-and-agricultural-workforce-at-1-june-2021-uk

Arable Prices Fall

Prices for UK arable crops have fallen lately, pressured by global supply and demand.  On 9th December, the USDA released its latest supply and demand estimates.  The estimates increased the stock picture for both wheat and coarse grains, leaving the global market looking better supplied than a month ago.

A month ago, the slow progress in Australia due to recent rains had caused delays to harvest and exports, increasing prices.  However, harvest progress has improved with drier weather, and while exports will still take time to catch up, prices have fallen in response.  Beyond the improved situation in Australia, the next key event for grain markets will be South American maize production.  The crop is expected to be big, adding to the fall in prices, but with an active La Niña (which brings dry weather in South America), the crop reports need watching closely.

Domestically, we are seeing the price effects of global supply and demand.  The price of UK wheat while initially moving up through early December, has now fallen.  New crop wheat futures (November 2022), closed on 16th December 2021, at £195.65 per tonne.  Whilst down from the highs we’ve seen of late, this still represents good value in historic terms, and is mitigating some of the increase in input costs.

Ex-farm value, published by AHDB, lag the futures market, and as such, continue to show strength in the most recent publication (price to 9 December).  However, they do show that milling wheat premiums have remained strong.  In the week ending 9th December, ex-farm milling wheat was over £50 per tonne more than feed wheat.

Barley prices in the UK are also high, in historic terms.  The barley market is tight this year in the UK. Through the early part of the season barley remained a popular choice in animal feed rations.  This has narrowed the gap between wheat and barley.

Oilseed prices have also fallen over the last month. Domestic oilseed rape prices for old and new crop delivery have followed the direction of Paris rapeseed futures.  Oilseed rape (and rapeseed oil) prices had attracted a large premium over other oilseeds.  This premium has destroyed some demand and pulled prices down.  This is likely to continue, especially with Australia harvesting a record canola (rapeseed) crop.

Pulse markets have bucked the trend of other arable commodities.  The price of feed beans has remained relatively flat.  Trade has reportedly been ‘good’ in feed beans, but there are signs that demand may be dwindling.

November Arable Roundup

The price of UK cereals have continued to show strength throughout the last month.  Concern over global availability has pushed the value of May-21 UK feed wheat futures to fresh highs. Additionally, new crop (Nov-22) feed wheat has been trading at more than £200 per tonne through the latter half of November.  This offers a good opportunity to think about your average prices for next harvest.  This support in the futures market has translated into strength in ex-farm prices.  In the week ending 18th November, AHDB Corn Returns prices quoted ex-farm UK feed wheat at more than £214 per tonne.

One of the main drivers behind the continued strength in grain prices has been poor weather, delaying harvests in Australia, and causing quality concerns.  Available stocks in the Northern Hemisphere wheat exporters are tighter this season than they have been for many years.  The market is looking to Australia (and Argentina) to relieve pressure in the market.  However, delayed harvests and quality concerns puts a squeeze on availability.

Domestic milling wheat prices are also showing continued strength at present.  UK ex-farm milling premiums were quoted at just over £52 per tonne over feed wheat, in the week ending 18 November.  This reflects tight availability of quality, domestic wheat.

Barley values also remain supported.  The discount of feed barley to feed wheat has narrowed to levels last seen in August 2019, at less than £10 per tonne.  The surplus available for either stock or export this season is seen at the lowest level since 2018/19.  Strong domestic demand early in the season, combined with 267,000 tonnes of exports up to the end of September, has eaten into the exportable surplus and narrowed the wheat-barley spread.

Oilseed rape prices have backed off slightly over the course of November.  This is not overly surprising given how strong rapeseed prices have been.  The value of rapeseed oil is curtailing demand and this has removed some support for rapeseed prices.  Strength in the Pound has also pressured domestic rapeseed prices.  Sterling hit the highest point against the Euro since February 2020 in November.  This trend in Sterling may continue as we move towards the next meeting of the Bank of England Monetary Policy Committee on 16th December.  Close attention will be paid to decisions on interest rates at the meeting, with inflation still prevalent in the economy.

Pulse prices are also remaining firm for human consumption markets.  As with wheat, wet weather in Australia is causing concern for short-term availability.  Feed markets are under some pressure, with buyers absent in the short term, either through having purchased sufficient volumes or due to a lack of haulage making any further buying challenging.

OSR Area to Rise

The results of the annual Early Bird Survey of UK planted intentions show a 13% rise in rapeseed area for harvest 2022, at 345,000 hectares.  The increase is not surprising given how firm rapeseed prices are.  But, the fact the increase is not greater, reflects the large increases in rapeseed prices since mid-September.  This is after most planting has been completed.

The area of arable fallow is also seen increasing year-on-year.  This is a possible reflection of the surging cost of inputs this season, which will challenge many margins.  With high nitrogen costs we may have expected to see an increase in the area planted to leguminous crops.  However, this is not the case, and the area planted to pulses is forecast to fall by 5%.  As with OSR, this is likely driven by the timing of price rises.

Unsurprisingly, wheat remains a firm feature in the rotation.  The area planted to the crop is set to rise for the second year in a row, following the disastrous 2020 harvest.  The area is seen rising to 1.81 million hectares.  This is slightly down on the 1.82 million hectare crop for 2019.  This will go further to easing the tight domestic market we have now, following the 2020 crop.

With a rise in the area planted to wheat and OSR, barley and oats look set to lose out.  The total area intended to be planted to barley is down 4% at 1.10 million hectares year-on-year.  Area is also seen down 101 thousand hectares on the five-year average.  With grain prices firm it is arguably no surprise that spring acreage is down 8%, whilst winter area is seen up 4%.

If the intended area planted to barley is realised, then we could see the narrow discount of barley to wheat continue.  The barley market is tight at present in the UK, and a reduced acreage would do little to replenish stocks.

It is worth highlighting at this stage these figures represent intentions, rather than confirmed plantings.  Spring acreages are still very much open to change, dependent on the price of both outputs and inputs (especially this season).

 

Harvest 2021

Following the poor crop of 2020, the harvest of 2021 was always likely to yield more positive results.  However, initial output figures from Defra were lower than some had expected.  The table below highlights the arable results from the 2021 Survey of Agriculture and Horticulture, showing crop production and area figures for the main crops in the UK.  The data is provisional, with final results due to be published on 16th December.  Figures for both Wales and Northern Ireland have been rolled forward from last season.

Wheat production was seen increasing by 45% year-on-year to just over 14 million tonnes.  This was primarily driven by a rebound in area following the difficult drilling campaign in 2020.  That said, average yields were lower than some had expected.  Yields in the south and east of England were seeming affected by the damp and dull summer.  Lower bushel weights and higher moistures were seen for many; Defra standardize wheat production to a 14.5% moisture.

For barley, lower production is no surprise, particularly given the large reduction in spring barley area.  The drop in area is countered by stronger yields, particularly for Scottish spring barley.  As a result, total barley output is just over 190,000 tonnes lower than the 2016-20 average at 7.1 million tonnes.

Once again, the challenges for oilseed rape (OSR) are evident.  With cabbage stem flea beetle (CSFB) still a huge challenge for many growers, the area planted to the crop fell to just 306,000 hectares.  This means the area planted to the crop has now fallen 399,000 hectares in the last ten years.  Even with an improvement in yield, production is seen below 1 million tonnes for the first time since 1989.  With OSR prices very firm at planting, will we see a rebound in acreage, despite the challenges of establishing the crop?

Oats have continued to gain acreage in recent years, owing in part to the challenges of growing OSR.  Production increased for the third year in a row.

Arable Market Update

With planting nearing completion for many, cereal and oilseed prices remain elevated.  Over the past month, UK farmgate feed wheat prices have gained £17.60 per tonne.  Values are supported by the tight global and domestic supply and demand situation.  The spot value of UK feed wheat futures reached £209.00 per tonne earlier in October.  While output prices remain high, it is also important to note that inputs for the 2022 crop remain expensive (most notably fertiliser).

At the global level, much of the attention for wheat remains on the strong demand picture, in the face of tight supplies.  The European Union had seen a strong start to exports, although the pace has slowed of late.  Early signs of waning demand for wheat in response to high prices has tempered the market.  Looking ahead, the Southern Hemisphere will be key.  Challenging, dry conditions were seen last year in South America, impacting grain and oilseed output.  With dry conditions continuing so far this season, the negative impact from the ongoing La Niña could see low output again and tight stocks.

The latest UK production numbers from Defra were released in early October.  UK wheat production is up 45% at 14.0 million tonnes.  But, with low stocks following last year’s small crop, domestic supply and demand looks set to remain tight throughout the course of the season.

Total barley production is down more than one million tonnes on the year, at 7.1 million tonnes.  The drop is mostly driven by the year-on-year reduction in spring barley acreage.  Despite the large fall in production, output remains only 3% below the 2016-2020 average.  As such, domestic supply will exceed demand once more this season  As a result, feed barley is at a £11.60 per tonne discount to feed wheat.  Barley needs to be priced to remain attractive into export and animal feed markets.

Globally, oilseed rape markets remain very tight after drought hit production in Canada.  Production is also limited in the EU.  As such, domestic delivered rapeseed prices remain well above historic levels.  Rapeseed delivered into Erith for November was quoted at £576.50 per tonne on 22 October, £57 per tonne up on the month and £215 per tonne ahead of last year’s level.

As mentioned, input prices remain elevated firm. While the CF Fertilisers’ plant at Billingham remains open following Government intervention, the supply situation remains tight.  Yara is reducing EU ammonia output by 40%.  Further, concerns over natural gas supply from Russia may heighten the situation.

New Oats Plant

What is claimed to be Europe’s largest oat processing facility is being built in the East Midlands.  Sited next to Camgrain’s existing store between Corby and Kettering, the plant will supply oat-based ingredients for the food and drink industry.  The mill will be run by ‘Navara Oat Milling’, a three-way joint venture between Frontier Agriculture, Camgrain, and Anglia Maltings Holdings (AMH).  The plant is due to be completed by 2023.  Following previous investments by the likes of Oatly, this demonstrates the rising interest in this crop. 

Arable Markets

The combinable crop harvest is mostly finished; what is probably the most expensive single capital item on the farm, the combine harvester, is back in its shed where it spends over 90% of its time.  The few days of work it does is critical, exciting but inevitably hugely expensive.

Wheat prices for 2021 crop have remained within their upward trend range, despite not recording an overall gain month from month. The current nearby futures feed wheat price of £194 is equal to that of this time last month, but between the two dates, prices have been £11/tonne lower. Currently, the present crop is teetering on contract highs, threatening to hit them this week. New crop (2022 harvest) is also at contract highs but prices have moved only £5/tonne in two months; its time will come.   Over 6 million tonnes of wheat have already been shipped from the EU, over 50% more than this time last year. There is not a 50% larger surplus, so this keen trade is pushing prices upwards, probably unsustainably. The US also has less wheat to ship this year by about 3 million tonnes. With China potentially buying European and US wheat, this is fuelling buying by speculators which is increasing the volatility in the market.

The current crop market is unsettled. Rumours suggest Russia is about to impose export taxes on its grains, making global supply tighter, The USDA is expecting less from Russia than initially predicted.  Dry weather in North America ahead of harvest also reduced crop yields by more than previous estimates in Canada, meaning the USDA publication also reduced production estimates for Canada. This has also fuelled the Oilseed rape prices, as Canada is the primary producer and exporter.

Barley prices are currently good, with brisk business occurring and a discount to wheat of only £7/tonne. A high quality harvest has given maltsters plenty of choice, and also picked up feed barley prices as less is available. Exports of spring barley into Europe are going well. Although some UK samples are high moisture which will keep them off boats.

Milling oats retain a £20/tonne premium over feed oats, sitting around £155/tonne spot for a clean sample.

Bean sales are picking up, but being a late harvested crop and a thin market, their trade is usually last to get going. Buying interest from Egypt, the largest grain buyer is high, although competition from the Baltic States is also present.

Beet Contract 2022

The beet price for the 2022 crop will be £27 per (adjusted) tonne.  This is a significant increase over the price for this year’s crop of £21.10 and £22.00 on the one-year and three-year contracts respectively.  These prices were themselves increased in February from the initial contract figures last autumn.  The 2022 prices will be a flat-rate with no market related bonus as seen in recent seasons.  Those growers already on existing multi-year contracts can move to a price of £25 per tonne if they contract for an additional year.

Other points agreed between the NFU and British Sugar (BS) under the Inter-Professional Agreement include’

  • the futures-linked variable price contract will be available to all growers.  This was trialled last year with a limited number of farmers.  Up to 10% of a grower’s 2022 contract tonnage can be sold on this basis.
  • a local premium is to be introduced.  This will pay an extra £2 per tonne for growers within nine miles of a factory, falling on a sliding scale to 10p for those within 28 miles
  • the Virus Yellows insurance scheme, introduced for 2021 will continue unchanged for 2022

The fact that the announcement comes so late highlights the difficulty the two parties had in reaching a price agreement.  The final figure was higher than the indicative price of £25 per tonne BS suggested in the summer, although not as high as the NFU asked for.  With buoyant prices for alternative crops and growing costs rising, a sizeable uplift was required to keep the area planted up.