Tag: Arable

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.

Wheat Area Down in UK

The area planted to wheat in the UK is expected to fall by 1.3% according to the results of the annual AHDB Early Bird Survey of UK planting intentions.  The survey, conducted by The Andersons Centre with the support of the AICC and other agronomists, captures a snapshot in early November.  This is a crucial caveat to the survey, in that it reflects the time before storms Babet, Ciarán and Debi.

Irrespective of the conditions of the storm, winter plantings were already expected to decline owing to the wet conditions which have persisted since harvest.  The area planted to winter barley is expected to fall by 6%.  Much of the fall in winter cropping will be replaced by spring barley (forecast up 13%) or oats (up 12%).

With prices having tumbled from their post-Ukraine invasion high, it is no surprise to also see the area intended to be planted to OSR falling by 16%.  This will also include a proportion which has already been written off, with flea beetle and slugs enjoying the mild post-planting weather.

Time will tell as to whether all the wheat area intended is planted.  Weather conditions between now and mid-January will be pivotal.  In addition, close attention needs to be paid to the condition of crops in the ground (see accompanying article).

A further update, with regional detail will be produced in mid-December, once Defra publish a full UK crop area figure.

Investors Push Wheat Prices Lower

The value of wheat has fallen considerably over the past month.  A bumper crop in Australia, forecasts for strong South American maize production, and the continuation of exports from Ukraine have all contributed to the slide in prices.

Furthermore, data from the Commodity Futures Trading Commission (CFTC), who monitor the position of traders in futures market, highlights that ‘managed money’ funds have consistently been net-sellers of Chicago wheat futures since the beginning of October.  Fundamentally, this means that those in charge of investment funds expect wheat prices to go lower.  The net position of such funds shows that investment funds are now the most bearish they have been since April 2019.

This bearish view for comes despite the global supply and demand balance for wheat being the tightest since 2007/08 and is a potential indicator of recessionary concerns.

The maize picture, which is an underlying driver of wheat markets, has been more positive with prices rising in recent days.  Much still hangs on the South American maize crop.  There are concerns for Argentinian production amid drought, whilst the Brazilian crop outlook is still positive.  The Brazilian crop is typically more than twice the size of the Argentinian one.

May 2023 UK feed wheat futures have tracked the global wheat price decline, falling to around £240 per tonne, a drop of around £20 per tonne from mid-November.  New crop, November 2023, futures have dropped by a similar amount, to just under £228 per tonne, on 15th December.

While the mood is generally negative around grain markets, there are still some potential positive drivers.  In particular, there is much discussion at present about the decline in India’s wheat stocks. India consumes 13% of the world’s wheat, and stocks are expected to hit a six-year low.

Global Grain Production

The latest International Grains Council (IGC) supply and demand figures show a year-on-year reduction of stocks of grains globally.  The change in global grain supply is driven by tighter maize production, the price of which underpins the feed grains market.

The IGC forecast of maize production is ten million tonnes lower than it was in July at 1,179 million tonnes.  If realised, maize production would be 40.9 million tonnes lower than in 2021/22. Even with a fall in usage, ending stocks would be 5% lower year-on-year.  The maize production forecast has mostly declined due to the conflict in Ukraine.  However, the impact of drought conditions in the EU cannot be overstated.  Maize production in the EU is forecast at 59.6 million tonnes in 2022/23, down 8.7 million tonnes from the IGC’s July forecast.

Wheat production is forecast to decline by 2.9 million tonnes, whilst usage is seen rising by 2.5 million tonnes.  Global wheat stocks are forecast to decline by 4.6 million tonnes.  Excluding Chinese supply and demand from the equation, global stocks are estimated to fall by almost nine million tonnes.

With the grains supply and demand balance tightening, year-on-year, we can expect support for grain prices to remain.  But, bear in mind that the lack of supply from Ukraine will already be priced-in to some degree.  Any positive changes in the conflict will still drive a fall in prices.

The oilseed market is moving in the opposite direction to grains.  World soyabean production is expected to increase by almost twelve million tonnes.  Ending stocks of soyabeans are forecast to rise by almost ten million tonnes.  The next forecasts of global supply and demand from the USDA are due on 12th September 2022, with the next IGC figures published on 22nd September 2022.

Neonic Beet Treatment

Defra has granted an emergency authorization of Sygenta’s Cruiser SB seed treatment on sugar beet crops, in England, for the control of Yellow Virus (YV).

The emergency authorisation is dependent on nine conditions.  The conditions is the need for YV prevalence level, as predicted by the Rothamstead Research model, to be greater than 19% of area on 1st March 2022.  This is a much higher threshold than the 7% requested by the NFU in their application for authorisation.

Additionally,

  • Where Cruiser SB is used, the application rate should be a maximum of 75ml per 100,000 seeds. The label recommended volume is 100ml per 100,000 seeds.
  • Seed rates should not exceed 115,000 seeds per hectare, this is above the commercial rate.
  • As with last year’s criteria for emergency authorisation, no flowering crop can be planted in the same field within 32 months.
  • No further use of thiamethoxam can be used in the same field for 46 months.
  • An industry-recommended herbicide programme must be followed to limit flowering weeds in and around the sugar beet crop.
  • Treated seed must be fully incorporated in the soil and at the end of rows.
  • Treated seed should not be left on the soil surface with any spillages needing to be buried.
  • The authorisation can be withdrawn or amended at any time.

Defra granted an emergency authorisation last season.  However, due to low YV prevalence in March, neonicotinoid-based seed treatment was not used.  In 2018, 25% of the national sugar beet crop was lost to YV.  The estimated cost of losses to processors and growers in 2018 was £67 million.

 

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.