Tag: Crops

June Arable Update

Much of Britain now probably has sufficient soil moisture to see the combinable crops to harvest, especially oilseed rape and barley.  We are projecting crop sizes of 7.1 million tonnes (mT) for barley (1.2 million less than 2020); 15.1 mT of wheat, approximately 50% rise on last year; 1.1 mT for OSR, 100,000 tonnes more than last year and about 100,000 tonnes more oats at 1.1 mT.  Overall, including ‘other cereals’, we are anticipating 26.7 million tonnes, up from 22.8 mT last year.  The figures are based on our expected crop areas and average crop yields 2014 to 2019.  This represents no records in either direction.  Whilst the crops areas appear relatively ‘typical’ we note there are still a lot of farms whose rotations are not back to what the management would have hoped for.

Old crop wheat prices have fallen £10 this month, slightly less than last month’s fall.  Old crop and new crop always come together so when new crop harvest starts, they are the same.  The fall is of little significance as so little is left.  With such a large price spread between old crop and new crop, few farmers have held on to grain.  New crop wheat values have fallen a Pound or so over the month, but have remained in a tight price range (£9.00 per tonne) since early April.

Across Europe, crop walkers have been reporting good yields pretty much everywhere.  The French for example estimate over 80% of their crop is in good/excellent condition, this compared with 56% last year.  Further afield, there is some concern that American crops are rather dry, but nobody is panicking yet.

In the table below, we have updated previous years’ data with the AHDB estimates and our own thoughts and calculations for the 2021 harvest and its subsequent marketing year.  We think that the UK will revert back to being a net exporter of wheat, having imported more than we exported last year.  Export Parity (i.e. the price grain needs to be to be sold out of the country) tends to be lower than import parity (the price it has to be to stop imports from coming in from elsewhere).

The barley market is currently quiet, as the buyers are waiting to see what the new crop brings.  UK barley is too dear compared with that from other locations to attract exports.  It is also too close to wheat price for most feed mills.

The UK OSR crop is looking rather well as it starts ripening.  This will be difficult to see for so many growers who decided not to grow it this year.  One has to ponder how many growers will return to OSR this autumn for next year?  We expect a rise in cropped area.  Prices have shot up in the last month from already high levels.  Normally we would expect oilseed rape to sit at about 2 to 2.2 times the value of feed wheat.  We are currently between 2.5 and 3 times, depending on date of movement, making the comparative gross margin of OSR quite attractive.  UK OSR is also trading at a premium over Paris rapeseed prices.  This is because we have imported so much (over half a million tonnes) this season.  This is mostly from beyond the EU.  For those planning next year’s rotation, remember price relationships will be quite different by the time they are sold.

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.

IGC Global Crop Predictions

As the northern hemisphere harvest gets underway, the forecasts for global grain output should become more accurate.  The International Grains Council (IGC) released an updated forecast at the end of July which is summarised in the table below.

Wheat stocks are expected to rise according to the IGC to levels of 2018/19, or in terms of stocks as a proportion of usage, no real change from last year.  However, from last month to this, the harvest expectations have declined slightly, making the stock level more akin to last year. A fall of 5 million tonnes from one month to another sounds like quite a lot but at this time of year when the crop is being gathered, it is minimal and of little impact to prices.  Consumers are comfortable at the moment that stocks will be available for them of the quality and specification they require.

The same cannot be exactly said of maize, with production thought 35 million tonnes lower than last year; back to the level seen for harvest 2017.  Consumption continues to go up each year, so stocks as a proportion of usage are forecast lower than previous years.  The IGC has the stock level falling from 322 million tonnes to 273 million, a decline of nearly 50 million tonnes, or in terms of requirement, from 28% of a year’s requirement to less than 24%.  This was already seen in June, but as we enter harvest, the figures will become more reliable.  Whilst this is a more dramatic fall of stock and supply level than wheat, it is still not at a level that is making the consumers frantic.

Soya production is though unlikely to be as high as last year, also being closer to the previous year, but with consumption gradually rising each year, stocks are seen falling from 15.6% to 12.3%; potentially bullish for the oilseed (and protein) price matrix.

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.