Category: Arable

The removal of Plant Protection Products (PPPs) would see the average household food and non-alcoholic drinks bill increase by more than 17% according to a report commissioned by the Crop Protection Association.  The report, written by Sean Rickard, which looks at the effect the removal of PPPs would have on consumers’ expenditure on food and drink, also found the percentage increased further for households with children, pensioners, or poorer households.  In addition the report found that some of the largest increases in prices, due to the removal of PPPs, would be for fruit and vegetables, with the report stating  prices for these items would rise by at least 40%, presenting a serious challenge to healthy eating.  The full report can be found at https://cropprotection.org.uk/media/1153/sean-rickard-food-prices-report-final.pdf

 

Confirming earlier predictions, the area of wheat and winter barley have risen for harvest 2019, whilst spring barley and, particularly, oilseed rape areas have dropped.  These findings come from the AHDB Planting Survey for 2019.  The table below summarises the key results.

Planting Survey– source AHDB
‘000 Ha – GB	2017       Final	2018     Final	2019 Estimate	% Change 18-19
Wheat	1,783	1,741	1,802	+4%
Winter Barley	416	381	422	+11%
Spring Barley	740	737	708	-4%
Oats ②	154	169	183	+8%
Cereals Total ①	3,097	3,027	3,115	+1%
Oilseed Rape ②	562	583	519	-11%
Total	3,659	3,610	3,634	+1%

① excludes ‘other cereals’ such as rye, triticale etc. ② OSR and oats figures for Wales not available yet (they were both 5,000 Ha in 2018 and these amounts have been included in the table)

The standout figure is the 12% drop in the oilseed rape area in Great Britain.  This is rather higher than the figure seen in the AHDB’s Early Bird Survey (see December Bulletin), indicating that some crops may have been written-off between planting and harvest due to poor establishment and pest issues.  The South East of England saw the largest drop in area, with 23% less OSR than last year.  However, there were falls in every GB region apart from the North East of England – even those areas in the north and west that, anecdotally, have suffered less from flea beetle than southern parts.

With the benign sowing conditions in the autumn, it is perhaps not surprising that the area of winter cereals has risen – farmers tend to keep planting whilst the ‘going is good’.

The survey also looks at cereals varieties planted.  The chart below shows trends in wheat Groups over the pat ten years.  In terms of barley, the survey found that 56% of the crop (both winter and spring) is varieties with malting potential.

 

British Sugar expects the 2019 beet harvest to ‘at least’ match that of 2018 in terms of tonnage.  In a trading update, released by its parent company ABF, the processor stated that this year’s planted area was 7% lower at just over 102,000 hectares.  However, this drop would be more than offset by higher yields resulting from good growing conditions.  Last year average yields dipped to 69 tonnes per Ha due to late sowings and the summer drought.  The 2019 crop looks set to surpass that, but it is too early to say whether it will get close to the record 83.4 tonnes per Ha seen in 2017.  Traditionally, this would be the time of year when the price for the next year’s beet crop would be announced (i.e. the 2020 crop).  However, the timing has slipped recently, with the price announcement last year being made in September.  This may again be the case.  With EU and global sugar markets still in the doldrums, growers should perhaps not expect too much of an uplift on 2019 crop prices. 

A larger potato crop than last year is on the cards, but the lack of any carry-over is likely to keep the market tight and support prices, writes Cedric Porter of World Potato Markets.

The AHDB’s first estimate for the 2019 crop kept the area virtually unchanged from last year at 118,000 hectares, the third smallest ever; although only 100 hectares less than in 2018.  A five-year average yield of 46.6 tonnes per hectare would result in a crop of 5.5 million tonnes, 11.6% more than last year, but still the seventh smallest on record.

A 5.5 million-tonne crop would keep the market in balance.  The 4.925 million-tonne 2018 crop has effectively had to last just 10 months because the 2017 crop was so large it was still being used well into September.  Stocks from the 2018 crop will be largely cleared by the end of July this year.  This means that there will be demand for the 2019 maincrop as soon as it comes out of the ground, and stocks may have to last until late August next year when the first of the 2020 maincrop is lifted.  Thus, the 2019 crop would have to last at least 12 months, if not 13 months.

A 10-month season meant the 2018 crop was used at an average rate of 492,500 tonnes a month.  If there is a 12-month season, a 5.5 million tonne crop would only provide 458,300 tonnes a month and a 13-month season would only cover demand of 423,000 tonnes.  Even a 5.8 million tonne crop would only cover demand of 483,300 tonnes.

One factor that could impact on the coming season is the UK’s ability to export ware potatoes.  Strong end-of-season demand from Eastern Europe means that 2018/19 exports are likely to be well over 200,000 tonnes; outstripping imports by more than 50,000 tonnes.  A larger EU harvest may stifle that demand, and there is also the prospect that a No-Deal Brexit could prevent the UK from shipping potatoes to the EU entirely because certification for the UK as a third-country supplier is not in place.

Old crop prices rallied at the end of the season, partly driven by increased export demand.  The AHDB average free-buy is now at £242 per tonne, which compares to a season high of £273 per tonne in December and a low of £211 per tonne in early May.  Early 2019 crop prices have remained relatively stable but are slipping as supply increases.

It has been confirmed that the 2019/20 season will be the last when anti-sprouting chemical CIPC can be used after an EU ban. Growers fear that very low MRLs (maximum residue levels) could mean future crops are contaminated from historic applications that have seeped into store walls.

Defra has reduced its figure for the 2018 harvest wheat crop by 49,000 hectares.  Many other crops have also seen revisions in their areas.

The changes have come about as a result of an investigation by Defra into the June Survey figures.  We reported in February that a large discrepancy had opened-up between the areas that the June Survey generated, and the figures from BPS claims in England.

Following investigation, Defra has found that some respondents to the Survey had provided data for their whole business rather than just for the ‘holding’ that they were asked for (a number of farming businesses comprise multiple holding numbers).  Once this was corrected for, the areas of most crops have fallen.  The table sets out revised figures for the main crops for the whole UK (although this revision only applies to England).

UK Crop Areas (June Survey) – source Defra
‘000 Ha	2015	2016	2017	2018 (old)	2018 (revised)	% revision
Wheat	1,832	1,823	1,792	1,797	1,748	-2.7%
Winter Barley	442	439	423	394	387	-1.8%
Spring Barley	659	683	754	763	751	-1.6%
Oilseed Rape	652	579	562	593	583	-1.7%
Fallow	214	262	241	270	265	-1.9%

For further details see – https://www.gov.uk/government/statistics/report-on-the-revisions-to-the-june-survey-crop-areas

The Survey figures still do not completely match those from the BPS, which are generally lower.  Defra are satisfied that this is correct, as not all farms claim the BPS.  As part of the analysis, figures on the gradually declining number of BPS claimants, and claimed areas in England have been published.  It is interesting to see that the area claimed has declined by 3% in the three years 2015 to 2018.

BPS Claimants & Areas – source Defra
	2015	2016	2017	2018	% change 2015-18
Number of Claimants	87,563	86,139	85,414	84,232	-3.8%
Claimed Area (‘000 Ha)	8,809	8,658	8,578	8,541	-3.0%

Arable profits look set to remain solid for the coming harvest, and even the one after, as long as Brexit does not cause too much upheaval.  These are the results of the latest update of Andersons Loam Farm model, prepared for the Cereals Event.

Loam Farm is a notional business, located in East Anglia, which has been running since 1991 and tracks the fortunes of arable farming.  It comprises a 600 hectare (1,480 acre) combinable crop farm running a simple rotation of milling wheat, WOSR, feed wheat, and spring beans.  Of the cropped area, 240 Ha are owned and 360 Ha rented on FBTs.  There is a working proprietor plus one full-time man and harvest casual.  The table below shows the results for the 2017 and 2018 harvests, a budget for the upcoming 2019 season, and a forecast for 2020.

Loam Farm Model – source The Andersons Centre
£/Ha           Harvest Year –	2017	2018	2019‚	2020ƒ
Output	1,205	1,205	1,243	1,287
Variable Costs	395	403	439	449
Gross Margin	810	802	804	838
Overheads	413	421	442	443
Rent & Finance	243	242	238	238
Drawings	77	79	79	79
Margin from Production	77	61	45	78
Basic Payment	228	228	226	219
Business Surplus	305	289	271	297

The 2017 harvest delivered robust profits with both prices and yields good – this was an improvement on 2016 when a negative margin from production was seen.   Variable costs were at low levels for 2017 because fertiliser was bought well.  In 2018, yields were affected by the drought, but higher prices compensated for this.  Extra costs meant that returns declined slightly.

For the upcoming 2019 harvest, yields from the wheat and beans are forecast to revert to normal levels. However, output of the oilseed rape is set to fall due to poor establishment and pest problems. With reasonably robust crop prices, output is up a little on 2018 but overall profitability falls as costs, once again, increase.

The current budget for harvest 2020 is based on prices remaining around current levels (this is heavily dependent on the outcome of Brexit and/or movement in exchange rates).  Output increases because it is assumed that oilseed rape yields will recover – it is not yet clear whether the 2019 season was just a ‘blip’ or heralds a fundamental issue with the crop.  Overall, profit remains positive, and similar to the relatively stable situation seen for the previous three years.  However, this is contingent on an ‘orderly’ Brexit, should there be a ‘No Deal’ outcome, then the prospects would be reduced.

The Loam Farm figures show that combinable crop farming has had a run of good profitability, that could well continue in the short-term.  However, this is more to do with external factors, not least the weakness of Sterling, rather than the fundamental strength of the business.  With the phase-out of the BPS over the next decade, and any market changes that Brexit might bring, the longer-term outlook is far more uncertain.

The important fungicide epoxiconazole will no longer be available in France.  The French regulator ruled that it was an ‘endocrine disrupter’ and posed a risk to human health and the environment.  Although, not of immediate impact to UK farmers, this could set a precedent.  The EU is due to review the authorisation of epoxiconazole in April 2020.  The active ingredient could be lost to all EU farmers if the EU regulator agrees with the French assessment.   

A major new player in the global agro-chemical sector was formally created on the 1st June.  Corteva completed its separation from the merged Dow-DuPont business.  This creates a new business with a turnover of €14bn focused on crop protection and seeds.  It operates in more than 140 countries worldwide and has a workforce of over 21,000.  It continues the trend of consolidation in the agricultural supply chain, and especially in crop protection, with Bayer’s takeover of Monsanto and ChemChina’s purchase of Syngenta.