Category: Arable

Fruit & Veg Blueprint

The Government has set out a ‘Blueprint for Growing the Fruit and Vegetable Sector’.  This was launched as part of the Prime Minister’s Farm-to-Fork Summit at Downing Street.  The aim is to increase the proportion of fruit and vegetables consumed in the UK that are produced domestically.

A key element of the plan is a replacement for the legacy EU Fruit & Vegetable Aid Scheme which used Producer Organisations (POs) to distribute grant support to the sector.  This will be replaced in 2026 by a new ‘Horticulture Resilience and Growth Offer’.  This will be open to all parts of the edible horticulture sector, ranging from large-scale field crops, such as potatoes, through to glasshouse production and vertical farms.  Whilst collaborative ventures will still be encouraged, the previous requirement for applicants to be in a PO will be dropped – individual growers will be able to apply.  Funding will be doubled from current levels to £80m.  Of this, £10m will be earmarked for orchard growers to access equipment, technology and infrastructure.

Other measures set out in the blueprint include;

  • address the issues that Controlled Environment Horticulture (CEH) (e.g. glasshouses) have with energy.  Specifically, this may classify CEH with other ‘energy-intensive’ sectors and make it eligble for targeted support
  • reform to the Planning regime to allow glasshouses to be built more quickly
  • a fund of £50m (seemingly on top of the £80m for the Horticulture Resilience and Growth Offer) to support packhouse automation
  • explore how long-term cold storage of products can be supported to allow UK produce to be sold year-round
  • ensure other support, such as the Sustainable Farming Incentive (SFI) and Farming Investment Fund (FIF) is suited to the horticulture sector
  • invest £15m in Genetic Improvement Networks (GIN) and establish a new GIN for soft fruit

See https://www.gov.uk/government/publications/a-blueprint-to-grow-the-uk-fruit-and-vegetable-sector for more details.

USDA Reports on UK Crop

The US Department of Agriculture (USDA) published its interpretation of the state of the UK growing crop in mid-April pointing out the UK is likely to harvest one of its smallest crops on record this summer. It expects the wheat area to be as low as 1.4 million hectares (1.7m in harvest 2023), and yielding 7.6 tonnes per hectare (3t/ac). With figures like this, it reported the UK will be importing approaching 3 million tonnes of wheat.

The Department expects barley the area to increase from 1.14m hectares last year  to 1.2m, because of more spring barley having to be planted. It is using 6 tonnes per ha as a yield estimate, giving a reasonable 7.25 mt barley crop.

The USDA also reported on oilseed rape, and quoted a crop area of 280,000 hectares and used 3.2t per hectare yield.  Acknowledging the last time the UK harvested less than 300,000 hectares of OSR, was in 1986.

Grain Markets

The price of grains has recently increased, driven by concerns about new crop prospects, with world supply and demand tightly balanced.  In mid-April, the price of new crop UK feed wheat futures (Nov-24) reached £200 per tonne for the first time since mid-January.  The increase in prices follows concern around crop conditions in key global markets.

Close attention is being paid to global weather patterns, with global grain stocks following the 2024 harvest expected to rise by just 1 million tonnes, year-on-year.  This is a significant decline in the International Grains Council forecast of stocks from the previous month (see table).  Managed money funds still hold a large sold position in grains and oilseeds, essentially betting on prices moving lower.  Recent weather concerns have led to some buying, increasing prices.  Further weather concerns would lead to more fund managers reducing their short positions.

The decline in output forecasts is driven by two key factors, concern over the production of South American grain in 2023/24 (reducing carry-in stocks), and reduced North American maize acreage.  Brazil has been suffering the lingering effects of El Niño, a weather pattern which brings warm, dry weather to South America.  This has resulted in significantly lower soil moisture reserves.  Much of the Brazilian maize crop will be planted in the coming months. With little chance of above-average rain in the coming months in central Brazil, crop prospects could yet worsen, supporting prices.

Dry weather is aiding progress with maize planting in the US, with progress ahead of the five-year average.  US farmers are expected to plant 5% less maize this year, in favour of soyabeans.  US weather will again be a key watch point for grain pricing this year.  Also in the US, the proportion of winter wheat crops rated ‘good’ or ‘excellent’ was estimated at 50% in the week ending 21st April; down 6 percentage points since the beginning of the month. The fall in conditions is due to dry weather.

Conditions have improved in Europe.  Warm dry weather throughout spring has aided planting progress in France and Germany.  However, winter crop conditions are still poorer than normal.  Concerns will be rising about the impact of warmer/dryer weather on winter crops.  The EU Commission crop monitoring report highlights the rapid acceleration of plant development in France and the increasing prevalence of disease pressure.

In the UK, crop conditions are down significantly on previous years.  To the end of March, just 34% of UK winter wheat was in ‘good’ or ‘excellent’ condition.  This is down from 90% as at March 2023.  A further update to crop conditions is due to be published by AHDB in May.  Winter crops are looking healthier than they were a month ago, where established, although not everywhere and challenges still remain for many especially in the North of England.  Furthermore, rainfall has continued to hamper spring planting efforts in the wettest regions, although progress has been made elsewhere.

 

Loam Farm

The 2024 harvest year continues to be challenging for cereals farmers.  Whilst dryer weather has allowed some spring operations to progress, the wet weather since the autumn has already affected the likely financial returns for the coming harvest.

In light of these difficulties we have updated our Loam Farm Model.  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.

The farm has just finished its sales from harvest 2023.  It can be seen that the returns have been far lower than the previous 2021 and 2022 harvests.  However, those two were unusually good (some of the best profits Loam Farm has seen in 30+ years).  The results for harvest 2023 are far more in line with historical averages.  However, even with the farm making a profit, the business is under some cashflow pressure due to higher working capital requirements and the need to pay tax on the profits from the two previous good years.

For harvest 2024, variable costs have reduced – mainly lower fertiliser values.  Overheads increase due to labour, machinery, fuel and general overhead cost inflation.  Some costs have increased to deliver the SFI options that the farm has signed-up for.   The key issue for the coming harvest is output though.  Despite the reduced UK harvest crop prices are un-exciting for growers – largely due to plentiful grain stocks  around the world.  Yields are also forecast to be lower.  Loam Farm is assumed to have established its winter crops, but the forecast yield has been reduced due to crop stress over winter and the significant bare patches in fields.  The farm has around a third spring cropping.  Again, these crops are assumed to have been established but the expected yield has been cut due to the late planting and unfavourable soil conditions.  It can be seen that, for Loam Farm, this means there is a forecast loss from production for this harvest.  The (declining) BPS and SFI are required to bring the business back into profit.

Global Grain Update

Global grain prices have been falling for much of 2024.  The main driver of the decline has been ample supplies of grain anticipated to come from South America.  Maize and soyabeans in Argentina and Brazil are still developing, making prices volatile in response to weather conditions.  Concerns over excess rainfall in the region prompted some fund managers to cover some of their record sold positions, supporting prices in the third week of March.  The role of fund managers in Chicago grain and oilseed futures markets is important for the direction of global prices.  If weather conditions turn, or other funds become more or less attractive the price of grain can move quickly.

With regard to supply and demand, the International Grains Council (IGC) published its latest update for the 2023/24 season, on the 14th March.  Furthermore, the IGC also published its first forecasts for 2024/25. These are shown below.

Despite cuts to global grain production in the Southern Hemisphere for the 2023/24 season, there is a greater fall in estimated consumption, resulting from reductions in feed use.  As a result global stocks are forecast to increase by 10 million tonnes.

For 2024/25, the global grain and soyabean stocks are due to rise again.  Whilst an increase in stocks is likely to move prices lower, the year-on-year rise is fairly small.  We are still some months away from the Northern Hemisphere harvest, and it would not take a big reduction in production (forecast or actual) to move global prices higher.

For the 2024/25 season, total grains production is forecast to rise by 28 million tonnes, 10 million tonnes of that rise is wheat.  Increases in wheat production are projected for Argentina, Australia, Canada and the USA.  Production is expected to fall in the EU, and the Black Sea.  However, usage of wheat is set to remain high and global stocks are forecast to fall by 5 million tonnes between 2023/24 and 2024/25.  This may provide some specific support to wheat prices.

UK Planted Area Update

Rainfall in the UK between August 2023 and February 2024 is the second highest for the period since records began in 1837.  This has caused major challenges for crop planting for the 2024 harvest.  In December, AHDB published the Early Bird Survey showing planting intentions for the coming year.  With weather issues continuing the Survey has been re-run capturing planting intentions up to the end of March.

Wheat planting is down 15% on the year at 1.46 million hectares; this includes a significant increase in spring wheat planting.  In 2019/20, the last seriously wet planting season, spring barley area increased considerably to pick up the slack.  The area of spring barley is forecast to increase for harvest 2024, to 881,000 hectares.  The oat area is also forecast to increase in response to the challenged winter planting conditions, with farmers seeing spring oats as an option.  The oat area is forecast at 208,000 hectares, an increase of 26%.  These spring cereals plantings are only the intentions of farmers.  The weather over the next few weeks will determine whether these intentions can be turned into actions.

Oilseed rape has also been challenged significantly, both by poor establishment conditions and increased pest pressure, notably from slugs, in the autumn.  The result is a 28% decline in the area likely to be taken through to harvest at 280,000 hectares.

One of the most notable increases this year is that of arable fallow, up 79%, to 558,000 hectares.  This area is will include a proportion of land which will be placed into environmental schemes.

Area figures only give a part picture of the state of cropping in the UK this season.  Whilst areas of winter crops are down there are significant area of crops in poor or very poor condition.  Very little of the poorer quality crop will be re-drilled, as such it will be carried forward with lower yield prospects.

Arable Roundup

Grain prices fell considerably during February.  The May-24 UK Feed Wheat Futures contract started the Month at £175 per tonne, as of 24th February the same contract was worth £164 per tonne.  It is a similar story for the 2024 crop, with November-24 Futures £9 per tonne lower on the month.

The direction of the UK market is driven by the availability of global grains.  Concern had been building about dry conditions in South America hindering planting progress.  However, both Brazil and Argentina have received rainfall and planting of maize and soyabeans has progressed.  Argentina is forecast to harvest an additional 22.5 million tonnes of maize in 2023/24 compared to 2022/23 (when it was affected by a widespread drought).  Brazilian grain and oilseed production forecast have fallen.  However, the country is still expected to harvest a combined 300 million tonnes of cereals and oilseeds; the second largest harvest on record.

Furthermore, grain prices are weighed down by cheap Black Sea wheat, slow US grain and oilseed exports, and the large sold position held by speculative traders in US grain futures.

Looking ahead to the 2024 UK harvest, the window of opportunity for further winter wheat plantings, prior to latest safe sowing dates, is closing.  Heavier ground is still sodden, especially across the East Midlands.  Crops on lighter land look far better.  UK growers face the prospect of smaller crops being sold at lower prices.  The poor outlook for the 2024 harvest is increasingly accounted for in grain prices.  Looking at the gap between old crop and new crop wheat futures (May-24 versus November-24), the new crop is worth almost £19 per tonne more that the old crop.  This time last year the November crop (November-23) was worth just £3 per tonne more than the old crop (May-23).

UK Feed Wheat Futures Chart

Source: AHDB

Farmgate grain prices have reflected the wider trend in futures, as shown in Key Farm Facts.  The UK still has ample old crop wheat and barley stocks, with prices uncompetitive into export markets.

Arable Roundup

Despite the ninth and tenth named storms (Isha and Jocelyn) since September hitting parts of the UK in January, rainfall has thankfully been lower than in recent months.  Whilst fields remain wet, and catching up on planting will be a while away for many, frosts have at least meant some arable farmers have been able to catch up on spraying.

In the six months to Dec 2023, England received 153% of the long-term average rainfall (1961-1990 average).  Of course, national average rainfall figures hide significant variation at a farm or field level.  Many farmers will have experienced flood levels seldom seen before.  This has led some to estimate cropped area could fall by as much as 15-20%.  UK wheat futures markets, whilst demonstrating a healthy premium to incentivise carrying grain from 2023 harvest beyond harvest 2024, have fallen considerably month-on-month.

The latest cereal and oilseed ex-farm prices are in Key Farm Facts.  Physical prices have not fallen by as much as futures prices, month-on-month, highlighting the impact that speculative trading can have on global grain pricing, and the tighter nature of the UK physical market.

AHDB has published its latest supply and demand estimates for cereals in the 2023/24 grain marketing season.  The figures show a reduction in the size of the 2023 wheat crop to 14 million tonnes (from 14.1 million tonnes).  There is also a significant increase in imports of 300,000 tonnes.  With demand falling for wheat from both millers and feed manufacturers, the additional imports are added to estimated stocks.

Any impact of a smaller crop from 2024, will already be priced in to markets in the UK.  As such, it will take the crop outlook worsening further, relative to current trade estimates, or a change in the global picture, for prices to rise.

Globally, maize remains in the driving seat.  The USDA increased its forecast of US maize production in 2023 and global maize ending stocks, in their January World Supply and Demand Estimates.

Emergency Sugar Beet Seed Treatment

Defra has authorised the emergency use of a neonicotinoid seed treatment on sugar beet seed in 2024.  This follows an application from the NFU and British Sugar.  However, Syngenta’s Cruiser SB, which is used to protect crops from virus yellows, will only be allowed under strict conditions.  This includes requiring the predicted virus incidence level to be 65% or above, as determined on 1st March 2024 by the Rothamsted YV forecast model.  If the threshold is reached, further conditions will be applied to the use of the seed treatment to minimise the risk to the environment.  This includes a maximum number of seeds planted per hectare and restrictions on farmers planting flowering crops in subsequent years in any field where treated seed has been used, allowing time for the chemical to break down.

Beet Price Deal

British Sugar and the NFU have finally agreed on a sugar beet price contract for the 2024 crop after months of tortuous negotiations.  The headline price is £40 per tonne – the same as last season.  There will also be an option for growers to choose a core price of £38 per tonne plus a market-linked bonus.  A further option is a contract that links the beet price to the futures price of processed sugar.  This will be limited to 35% of a growers contract tonnage.  A yield protection scheme will be offered at a cost of a £1 per tonne reduction on the price.  Growers within 20 miles of any British Sugar factory will receive a local premium of up to £2, based on distance to the factory.  The cash advance option, late delivery allowance, and frost insurance are on the same terms as 2023 crop.  Following the delays and issues with agreeing a price this year, both parties have committed to a shorter timeline next year which will see a conclusion of negotiations in time for an offer to be made by the 30th October at the latest.