Tag: Arable

AHDB Planting Survey

The far better establishment conditions for the 2021 crop compared with the atrocious weather for 2020 harvest has resulted in a huge swing to cropping, largely back to more ‘normal’ levels.  For oilseed rape, the loss of confidence in growing the crop largely because of the mostly uncontrollable pressure from cabbage stem flea beetle (CSFB) has meant the harvested area has dropped to its lowest for over 30 years.

According to the AHDB’s 2021 Planting and Variety Survey, GB winter wheat plantings have recorded a year-on-year rise of 26% to 1,742 thousand hectares.  Every region recorded a rise in plantings, the most significant being in the East Midlands (+47%) and West Midlands (+42%).   Nabim Group 1 and 2 varieties made up 44% of the area in 2020 compared with 41% last year and 36% in 2019, showing a rising proportion of milling wheat being grown.

The total GB barley cropped area has recorded a 18% year-on-year fall to 1,119K hectares as growers ‘correct’ their rotations from their enforced spring cropping regime last season.  The winter barley area (not surprisingly) rose 15% to 350K hectares, with again the East Midlands recording the most significant rise of 88% with the South West showing the next largest rise of 35%.  As a consequence, spring barley plantings have inevitably recorded a 28% fall on the year to 769K hectares; still quite high compared with the years before 2020, demonstrating the gradual increase in spring cropping we are seeing in the UK.  According to the AHDB, 58% of the GB barley area is malting barley varieties; last year it was 75% and 56% in 2019.

The area of oats has risen by 1%, with an 18% rise in Scotland, and 2% fall in England and Wales with big swings in some regions (down 22% in the East Midlands and up 28% in the East).

The awful growing year in 2019/20 for oilseed rape, because of both the weather but also worst infestation so far of CSFB, clearly put a large number of growers off for this year.  Ironically, the crop looks good and its harvest is starting.  Yet, with a 21% fall of area in the East Midlands, 22% decline in the South West and 34% reduction in the East, the overall crop area has fallen 15% since even last year.  This makes the cropped area the lowest since 1989 when including spring OSR.  We expect those who stuck with it for this year will observe a good harvest and high gross margin so it may encourage a small resurgence of cropping for 2022.

The full AHDB Planting and Variety Survey can be found at https://ahdb.org.uk/planting-variety-survey

Early-Bird Crop Area Forecasts

The AHDB’s Early Bird Survey of cropping intentions for harvest 2021 was released in December, showing a significant rise in winter cereals area.  The table below shows a summary of the results.  Changes in cropping area have been extrapolated onto the data from Defra’s provisional 2020 UK June Survey to produce forecast crop areas for the next harvest.

The wheat area is forecast to rise by a substantial 28%.  If this is correct, it would result in 1,815,000 hectares for harvest 2021 – similar to 2019 levels.  The spring wheat proportion within total wheat is seen falling to about half its 2020 area to 56,000 Ha.

The winter barley area is expected to have risen by 24% to about 394,000 hectares.  Oilseed rape’s decline continues with another 18% reduction on top of the area collapse from last year to 318,000 planted hectares.  This would be the smallest area drilled since 1986.

The area of spring crops is expected to fall in 2021.  Spring barley is down by 30% to 767,000 hectares; a fairly ‘normal’ area.  The survey suggests that the pulse area may rise by 7% to 257,000 hectares, a high since 2001, as growers switch from oilseed rape.

This year, the large percentage swings are demonstrating the correction back to more trend-like levels of cropping that we are familiar with in a year with reasonable drilling opportunities.  It maintains the long term trend of gradually decreasing winter cropping.  With opportunities for large amounts of first wheat, ample time for ground preparation and early opportunities to drill, we might have expected a much higher winter wheat area, but more growers are opting to hold back until spring.  This shows in the figures.  Also, the lack of confidence in oilseed rape is demonstrated by the continued rapid decline in its cropped area, almost all of which is winter planted.

The Early-Bird Survey is undertaken each autumn to assess national cropping intentions.  It is carried out by The Andersons Centre with the help of the Association of Independent Crop Consultants (AICC) and other agronomists.  Over 80 agronomists took part in this year’s survey contributing over 615,000 hectares of arable land stratified across all regions of Great Britain.

Planting Update

This is a short article this month.  A few bits and pieces of drilling have apparently been able to take place, on the slightly lighter and faster draining land, but really very little; probably not enough to match the amount of autumn drilled barley, oilseed rape and even wheat that, this month, has been officially written off by the farmer and his agronomist.

Some commentators in regions less affected by the heavy rain and the saturated soils are confused by the noise, expecting the flooded fields to be confined to small corners of fields, floodplains or pony paddocks.  There are consequently still people projecting wheat crops comfortably over 13 million tonnes and others sticking to sub-10 million.  Currently, our wheat area projection sits at about 1.6 million hectares, of which about 1.1 is probably planted.  This would be at about the level of the 2013 crop and before that not seen since 1981.  With a lower than usual yield, this may give a 11.5 to 12 million tonne crop.

Some seed merchants have reported fast sales of all spring crops (possibly with the exception of oats), and for some crops, pulses in particular, sales have been stellar.  Indeed, it is possible that some farms have overbought, with a view to either cancel their spring seed order or keep their winter seed through until next autumn.  It has been a good year for seed merchants but next year might not be.

Arable Roundup

UK Harvest

Until the last week of August, harvest was a headache for many farmers.  Many areas had four inches of rain in June, another four in July and about 2.5 in August, meaning the ground was soft.  Intermittent showers meant progress was slow.  However, the last few days have been all-systems go, facilitating a catch-up.  The warm, dry, weather has also meant producers have been far less dependent on the drier than at the start of the harvest.

With a majority of cereals now cut, yields have been good to excellent overall.  Winter barley has yielded higher than average with plenty of our clients reporting 8 to 8.5 tonnes per hectare (3.25-3.5t per acre).  Wheat has also been very good.  Strong loam soils that have been cared for with ample organic matter over the years and heavy land have achieved in excess of 11 tonnes per hectare (4½ t per acre) – and not just in isolated cases.  Bushel weights of 80+ have been commonplace too, but Hagberg readings have not been as good following the intermittent rain-shine weather.  Lighter soils and those with less organic matter have been affected by the dry weather in May and early June.  However, yields are still good so plenty of light land farmers are recording above average results.  Oats are still in the field and losing colour so possibly less attractive for milling.

OSR has been variable because a fair area had larvae feeding on plants in spring which led to poor podding in crops.  That led to yields being moderate at best, many reporting around the 3-3.3 tonnes per Ha (1.2-1.3t per acre).

Beans have been at high risk of bleaching following the showery weather of the previous few weeks.  Beans discolour and therefore lose value easily and quickly.  Those that have managed to harvest beetle-free and coloured beans could expect a £25 to £30 premium over feed beans but the large amount of feed means this base price is not great.

European Harvest

Cereals harvests are completed in most part of the EU, including France and further South.  They are near completion in Northern Germany and Poland, and well underway in Eire, Denmark, Scandinavia and Baltic States.  Again, yields have been bumper.  For soft wheat, Strategie Grains, an analyst company forecast European production at 143 Mt, a considerable 12.3% increase on last year.  The wheat area is up by ¾ million hectares and yields are also above the 5-year average.

In France, the wheat crop will be high at 38 to 40 million tonnes depending on whom you ask.  Only one Department has recorded lower than average yields and proteins are high.  The German and Polish crops are also good.  Even outside the EU, the Ukrainians have also had high yields, and have already started their export campaign in earnest, with higher sales than last year and a target of 21 million tonnes, which is 5.5 million more than last year.

The EU is likely to have cut over 60 million tonnes of barley this year, mostly winters.  France will have seen a rise in springs because of oilseed rape problems.

Prices

This means there will be a large EU crop this year and nearby neighbours also providing surpluses. Achieving exports from the UK might prove tricky.  This explains why futures prices have hit contract lows in all positions in the last couple of weeks; we have lots to sell, everybody else who exports does too and those who import also have more grain than usual.  It is clear what this might mean to prices, especially when the possibility of having tariffs looms over the UK crops.  It is perhaps therefore no surprise that wheat values have fallen by £20 since June and £10 per tonne solely in August.

The weakening Pound has done little to retain any kind of value in commodities, in fact, comparing the UK Nearby wheat futures contract prices with the comparable French, a gap has opened up of about £10 per tonne more than usual. This might be the Brexit effect.

Arable Market Thoughts

It never rains, it always pours!  By early June, some were concerned about the dry soil conditions, by the end, the concern was flooding.  Most of the crops that had been flattened have picked up, but not all, increasing the risks of Fusarium.  Combinable crops now require sunshine to help them ripen with good quality and bushel weights.

The other thing that has fallen over this month (which we had been warning would happen) is the premium that the old crop wheat carried over new crop.  Sooner or later the two crop prices have to merge, and they did this decisively in June.  In fact old crop long-holders will be feeling frustrated by the chart clearly showing July 2019 futures values in January of £180 now being worth £145.  Also, new crop wheat prices have taken a sharp turn upwards, now clearly ahead of old crop.  This will encourage any buyers to take short term cover and close the gap.  Farmer sellers with adequate storage might be tempted to carry the grain over if it is in satisfactory condition.

Globally, the wheat crop is overall healthy and abundant, with expectations from the International Grains Council that it will outstrip consumption to leave slightly higher stocks this coming season.  This has helped explain the price falls in the market.  Maize though, the main combinable crop in the world, is thought abundant but not likely to match annual demand, so stock levels are expected (by the IGC) to decline again this year.  This will be the third decline since 2016/17 from 363 to 284 million tonnes; a substantial fall.

Soybean stocks are also thought likely to return a small decline in physical stock level after the 2019/20 season, although only by 1 million tonnes.  This is a tiny change after such a sharp rise in stock from 25 million tonnes to the current 53 million in only six years.  The question of how much oilseed rape will be grown in the UK is concerning many; whilst we have reported the poor OSR conditions on many farms this year, we have not pointed out that other arable farmers are quietly very happy with the condition of theirs. Some has been grubbed and replaced, other fields are looking excellent.

Bean crops are largely looking good throughout the country, and with new crop reaching good prices, perhaps now is the time to book some in.  Currently, we would expect bean crops to outperform their overall dismal performance from last year.

Grain Market Commentary

Everything grain marketing is focused on new crop by this time of the year, even the remains of the old crop.  However, this year there is a problem.  Without knowledge of a Brexit outcome, exporters have no idea what they can afford to pay, not knowing whether there will be any kind of trade deal meaning a transition to Brexit and therefore whether they will have trade tariffs to pay to send grain to the EU-27 next year or not.  Furthermore, importers are in the same position.  Trades for the new crop are just not taking place, at least not until after Halloween.  A likely wheat surplus for the UK this coming year is compounding the problem.

The domestic marketplace is far less impacted by Brexit and theoretically not at all, however, the traded tonnes are those that set domestic prices.  Buyers at the grain processing and milling firms are dealing with this mainly by carrying-on as normal – all their competitors are in the same position, and unless any take any speculative positions, they will all experience the same price shifts simultaneously.

The weakening of Sterling as a result of political uncertainty has given a small boost to grain prices.  Barley prices have lifted in recent days as well as wheat, albeit by less than the rise of wheat prices.  This might seem a worse outcome for barley, but the potential barley surplus and uncertainty over the export of the crop from November might actually mean this is a good opportunity to sell.

The weak Pound has boosted the oilseed rape price in Sterling terms during May.  Oilseed rape does not have a trade tariff on it, so the complications from Brexit are less significant.  However, the US government has announced substantial support in terms of additional grants for soybean growers in the USA, in a bid to compensate them for the US-Chino trade spat that they have become embroiled in.  This does not seem to have had a major impact on EU oilseeds as yet.  One might assume a high global oilseed crop this year, considering the Brazilians have also been producing lots of soybeans to steal the US business to China; it all has to go somewhere.

Beans do have trade tariffs, but only small ones.  The new crop is in very good condition at the moment, a rather different situation to their final condition last harvest.  Again, it is new crop that the markets are focused on, and currently, other proteins such as rape meal and soybeans are comparatively cheaper than pulses so their incorporation into feed rations is likely to be relatively small.

In the field, growing crops are looking good throughout the UK, that is with the exception of oilseed rape.  Grains and pulses are growing well, and reports of serious disease issues are rare.

UK Arable Viewpoint

There have been some healthy volumes of wheat export sales from the EU in March, especially from France to third countries, helping to clear out the overall EU surplus.  Whilst it might seem that France is a competitor to the UK and so French business is not good for UK sales, it is still the same Single Market that volume is being taken from, reducing any surplus and a rising tide lifts all boats in the same harbour; at least for now.

The increase in wheat area in the UK this coming year will be the first rise for five years, and, even then, primarily because 2013 was fraught with drilling problems leading to a very low drilled area.  The prospect of a large 2019 harvest is contributing the sharp decline in grain (wheat values) for new crop in the UK just now.  It is also possible that the market has started making an adjustment to partially build-in the cost of tariffs for new crop exports, should we leave the EU without a deal.  The UK has a feed wheat surplus most years, the majority of which has been exported to Iberian customers for decades.  This would be one area where the impact of Brexit would be felt by the farming community relatively quickly.

Old crop feed barley values are still discounted against their calculated feed-value equivalent to wheat, but still higher than new crop in a similar fashion to the wheat prices.  New export business for malting specifications has temporarily slowed whilst traders are unsure of whether or how much tariffs they are likely to have to pay.  It is much easier once they know what to tap into their calculators so they know the relative costs of grains around the world.

Spring drilling conditions have been good to excellent throughout Britain, it’s just that there’s not so much land available to drill as conditions were so good in the autumn, with more land was drilled then as well.  We would assume there will not be much fallow land this year for that reason.  The area of spring wheat has fallen dramatically this year according to anecdotal reports, partly because the favourable drilling conditions last autumn left little space for spring wheat.  Similarly, spring barley area is thought lower than last year too.

The pulse market is just about finished now so anybody with beans still unsold should think about what they plan to do with them.

In Leicestershire’s heavy soils, the damp footprint beneath the boot suggests a good seedbed and ideal growing conditions. However, dig a spade’s depth into the soil and it becomes evident the soil is still rather dry as a result of last year’s drought.  In fact, this winter has also been a relatively dry few months.  The crops survived last year’s drought because of the very wet spring, this year, the soil moisture is far lower than this time last year so crop will rely on reasonable rains this year to reach harvest safely.

Grain Price Spring Volatility

The £16 per tonne difference in price between old crop and new crop wheat will eventually close.  Either old crop prices will fall or new crop prices rise.  There is currently not much happening to suggest a major increase in new crop values (and prices tend to drift downwards on the lack of new market information). But this time of year tends to see grain market volatility increase slightly.  This is for several reasons.

  • Firstly, the limited tonnages of old crop grain at the end of a marketing season have to match up with demand, and any surpluses, or even more so, shortages, could see prices shift considerably.
  • Secondly, the winter crops that have been lying dormant around the world emerge from their hibernation and agronomists get to see how well (or not) the forthcoming crop has coped with the cold.
  • More importantly though, a quarter of the world’s wheat and almost all the maize are only now being planted, meaning that over the course of this month, the total wheat area for the Northern Hemisphere (which accounts for 80% of cereals) will be established.
  • Weather conditions at this time of year affect crop growth considerably.  However the forecasts, particularly concerning large grain-producing regions such as the US Prairies tend to affect the traders more.  One forecast of rain and the markets swing one way, and another forecast for drought and they swing the other.
  • Finally, whilst the International Grains Council started suggesting its global crop area thoughts for 2019 last month, and the US Department of Agriculture posted some thoughts along the same vein, April is the first month that the new crop is analysed in any real depth by global grain analysts.  This alone causes market shifts as market traders look carefully at these reports.

Cereal farmers will have relatively little grain left unsold by now and will be thinking more about the new crop.  It is important to keep a focus on the underlying market fundamentals when marketing grain in the spring rather than respond ‘knee-jerk’ style to daily announcements and short-term movements.

Arable Market Commentary

New Crop

In terms of growing conditions, little could be more extreme than the temperatures recorded this month compared to last February.  In the February 2018 bulletin we cited the ‘Beast from the East’ delaying drilling.  This year, spring drilling is well ahead of normal with almost 25% of spring barley already in the ground.  A word of warning though; early drilled spring crops are not always the highest yielding, and there is time yet for very cold weather.  We reserve any judgement on harvest yield potential.

The USDA makes its first prediction of US wheat area every February, this year suggesting decreased plantings, in a falling area trend.  Indeed, if correct, it would be smallest US wheat area for 110 years.  This identifies the changing demands for grains, shifting to maize, for pig and poultry feed, biofuels and indeed even human food.

The International Grains Council’s first expectations of the forthcoming 2019/20 year are for a rise in global wheat production, of about 1%, a similar magnitude to the annual rise in demand so no substantial changes in year-end stocks.  This seems to contradict the findings of the USDA, but theirs, of course is USA only.  An increase in coarse grain harvests are also foreseen by the IGC, with maize and barley both up about 1%.  This is in line with the rise in demand so is no more than trend demand.  Much of the coarse grain increases are predicted to occur in the USA and China; the two biggest grain producers, so a small proportional change in these countries will be noticed.  However, there are also rumours that China is considering rolling-out a major expansion to its bioethanol inclusion policy, which would have a considerable impact on feed grain demand in the coming few harvests.

Of course, much of these crops that have been forecast have not yet even been drilled; all maize, and soybeans are spring crops and Canadian, Russian and half of the US wheat is also spring varieties.  Therefore, these projections are statistical analyses coupled with a smattering of planting intention data, not hard evidence of plants sprouting from the ground yet.

Old Crop

In the EU wheat market, a gradual decline in values this month (making European grain cheap compared with American grain) led to Europe and Russia winning some large export contracts to Saudi Arabia, boosting the export figures and balancing the supply and demand books.

The demand for ruminant feed is currently slipping away as cattle venture into the fields and sheep have grass to eat; leaving a lack of demand for feed barley, which has fallen to a £25 per tonne discount beneath feed wheat (which is primarily fed to housed chickens).  Barley is being included at maximum rates in rations now for this reason.

Oilseed rape prices have taken a tumble, based on the arrival of a large vessel loaded with Canadian canola, and the reduction of the rapeseed crush volumes in the UK.  This time of year is often difficult for European rapeseed (and pulses) as harvests from the Southern Hemisphere become available and start putting pressure in markets.  The Old Crop pulse market is increasingly thin and new opportunities will become rarer now, despite a healthy premium over feed wheat for pulses.

Combinable Crops: January Update

Sterling is at its strongest point against the Euro for almost a year and a half (which lowers grain values), yet it is still only 4% stronger than it was when it started rising in early January. This means it has taken approximately £7.00 off the price of a tonne of wheat, and £13.00 from oilseed rape.  For many, this is the difference between a profit and a loss, but, equally, is not such a violent swing as we have seen in previous marketing years, when wheat price has shifted by far more in single days.

The grain market is relatively quiet; surprisingly high amounts of wheat remain unsold, despite some predictions from the trade that farmers would be sold ahead of Brexit.  In fact, the farming community being pro-Brexit on balance might see opportunities from selling later this year.  However, long-holders should be aware that the spread between old crop and new crop wheat currently sits at just under £20 per tonne, ex-farm.  Large price spreads like this have to close at some point which suggests either old crop is too dear or new crop is cheap.  The chart below shows the big step in prices as we look ahead to 2019-crop.

The discount from feed wheat to feed barley currently sits at about £10 per tonne, a comparatively small 6% of the wheat value.  Yet despite this, the discount is attractive to feed compounders.  Good quality malting barley retains a comfortable £30 per tonne premium over feed barley, but the market is currently thin with small volumes of new business being done.

The pulse market is also thin, with not many beans remaining unsold on farm.  The market is therefore starting to turn to new crop marketing; a difficult one as quality is unknowable at this time of year ahead of harvest.  The market has been strong though, with the price spread of feed beans over feed wheat having risen to over £50 per tonne: a margin not seen since the spring of 2015.  This is largely because of the small and damaged harvest of 2018 following the hot weather, coupled with political complexities within the global vegetable protein market at present.  Many farmers will be looking to secure more spring bean seed, although its availability is not clear, despite a derogation for certified seed to have a lower germination this year than usual.