Tag: OSR

Harvest 2022 and Prices

Overall

The UK grain harvest is all-but finished now and, overall, has produced excellent results.  Completion by the end of August must surely be a record?  The exceptionally dry and hot weather conditions have brought with it opportunities, but also challenges.  Almost all the harvest will have been gathered dry, but hot.  The grain drier was not needed to reduce moisture for almost all farms.  Yet some used them to cool grain.  Now the nights are cooling, farmers should be turning fans on to reduce the grain temperatures.  As frosts arrive this will be a useful time to cool the grain further.

Numerous farmers have experienced field fires with losses of standing grain.  At this stage we have no measure of how much has been lost in this way.  That risk is now subsiding, but farmers must pay attention to their straw stacks.  They should make more, smaller stacks than usual and preferably hidden from sight to as not to attract attention.

Wheat

Reports suggest this year’s wheat crop is excellent quality with a good yield.  After the dry conditions we have experienced since June, it is easy to forget the very useful spring rains we received as grains were starting to fill.  This was just as important as the ripening sunshine and the dry harvesting conditions we have had this summer.

Some reports suggest many farms have experienced greater than usual variation of  protein levels within the same varieties.  This means that grain sampling should be given particular attention this year.  Any additional mixing might be useful if this is possible, as segregating protein levels is difficult and probably now too late to do.

New crop wheat prices fell in the latter part of August.  Earlier in the month world grain markets were driven up by reports of very dry weather in the maize growing regions of the US.  In addition, China was claiming a wheat crop catastrophe, with very poor conditions, suggesting fairly extreme crop failure conditions.  However, it now turns out that China has harvested more wheat than last year!  This reduced forecast Chinese import demand.  Concerns around the Chinese economy have also dampened expectations of Chinese buying.  The last few days have seen rain in the Mid-west of the US which has eased concerns about the maize crop and pulled down all grains prices.

The other global factor of note is Ukraine.  Last month, we talked of how Ukraine and Russia had brokered a deal to allow Ukrainian grain exports to restart.  Grain was stuck in elevators, stores and farm barns.  We were skeptical it could be exported quickly or even reach the ports in many cases.  In fact, almost two thirds of a million tonnes were exported in the first three weeks of August.  Furthermore, the programme is continuing with expectations of 3 million tonnes going out in September.  Not only does this provide grain that the world market had largely written off, but also makes storage space for the new crop.  The Russian crop has also been good and exports have been high – partly making-up for the tonnages lost to the world market from Ukraine.

Barley

The UK barley crop is proving to be of a particularly high quality; most growers are thrilled with their results.  However, when everybody shares such success, the market reacts.  Indeed, the feed wheat:barley spread has grown to up to £20 per tonne and prices might have to decline further as UK barley is still not competing in the export market.  Furthermore, the malting specification, especially for springs is so good that many crops that would have achieved malting specification in previous years will end up being fed.  The malting premium has been falling as so much of the crop meets the required specification.

Reports from Scandinavia and other parts of the EU also highlight high quality and good yields, suggesting the UK malting barley crop faces some stiff competition in the marketplace this autumn.

Beans

Beans ripened almost too quickly this year.  Being usually among the last crop to go through the combine, their ripening from the high temperatures was a little premature.  Small bean size, especially in the spring beans, will have reduced the crop size to an extent.  Shattering bean-pods has also been an issue.  However, overall most farmers are relatively happy with their crops.

OSR and Drilling

The oilseed rape harvest was completed in record time.  This was the case throughout Europe as well as in the UK.  Not only is Europe reporting 10% more OSR than last year, but the Canadian crop is apparently half the size again from last year.  Australia too, is reporting 10% more area this year.  Even in Ukraine, where the crop had been partially written off, a reasonable tonnage has been harvested; more than one might have expected in the circumstances.  Prices have fallen in response and are now at or near to the levels in February – before the Ukrainian war began.  This is £220 beneath the highs of mid-May.

Little OSR drilling has taken place so far, with soils too dry to take the seed or allow germination.  What little rain has fallen has barely softened the tops of the soils, rather drained through the cracks in most fields.  Some are becoming concerned with this, although there is still ample time for rains to fall to allow satisfactory drilling and germination.

 

 

UK Arable Market Update

With harvest creeping ever closer, attention remains on the weather in the UK.  Generally, crops are looking healthy, benefitting from rainfall in the latter half of June.  Concerns had been growing around the heat in the middle of the month and AHDB’s Crop Condition Survey highlighted crops moving backwards to 24th May, relative to the end of April.

UK prices have recently fallen, tracking the decline in global markets.  Trade in old crop is now largely over and attention from buyers will be focused on new crop.  Demand for new crop, in particular barley, is likely to be lower next season driven by a decline in the size of the UK pig herd.

UK feed wheat values have fallen, November-22 futures closed at £282 per tonne on 23rd June, down almost £36 per tonne from the end of May.  November-23 futures have fallen by £20 per tonne to just over £248 per tonne.

Barley prices have also dropped, feed barley for harvest movement is trading at a £32 per tonne discount to wheat.  Malting premiums have reportedly firmed slightly although the feed base has fallen.  The winter barley harvest in the UK is now imminent.

Oilseed rape prices have responded to weakness in global vegetable and mineral oil prices.  Concerns over the global economic picture has been coupled with expectations of large soyabean crops in South and North America.  UK ex-farm oilseed rape prices have fallen £775 per tonne at the end of May to £596 per tonne, as at 24th June.  Field bean values have generally fallen with other output prices, albeit at a slower rate. As of 24th June, beans were quoted at £306 per tonne (spot, ex-farm).

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.

Grain Market Update

The UK had a record-breaking cereals harvest in 2019.  No records have been broken this year, perhaps apart from the percentage of oilseed rape written off or the percentage decline in wheat crop from one year to the next!

According to provisional Defra estimates, the total wheat and barley crop was over 18.5 million tonnes – nearly 6 million lower than last year, and all of that decline was because of less wheat (the fall in winter barley was more than compensated for by the rise in spring barley).

The chart shows the main combinable crop areas for the UK for a decade. Under ‘normal’ conditions, crop areas vary slightly from one year to another according to shifting market requirements and other economic influences as well as perhaps a small weather effect.  About once every 7 or 8 years, we see greater shifts in cropping because of inclement weather covering large proportions of the country.  That is not to say we can predict when the next weather event will be of course.

The change in the crop rotation was clearly dramatic, and the amount of resultant crops for marketing is equally unusual.  Whilst farms have a different make-up of the crops they want to sell, the market demands are much the same.  There is a mis-match, which will drive imports and exports to balance supply and demand and is also causing sharp price movements.   Prices for wheat have spiked in recent weeks, having risen by over £20 per tonne for since harvest.  The unusual market also explains why barley has not followed suit as it often does, instead, a price spread over £40 has emerged as evidenced in the graph below.

Demand for malting barley is slim, as Covid restrictions close pubs and bars throughout the country and beyond, reducing their already severely reduced requirement for beer.  The considerable pile of spring barley is finding ample buyers but for feed.  Prices have picked up a little but continue to trade at considerable discounts to wheat in many parts of the world. The new crop price spread is smaller but still £15 to £20 per tonne.  The figure below shows delivered feed wheat and barley prices in UK and illustrates the growing spread between the two crops.

The oilseed rape market for anybody who has any to sell, is thin and, as usual, is led not by OSR, but the soy and palm oil markets.  The lack of OSR in this country has very little impact on prices.  Global vegetable oils are highly susceptible to currency markets and political moves, particularly regarding the relationship between the US and China.  Brexit has little impact on the oilseeds markets as they have no tariffs.  Brexit negotiations affect these markets more because the strength of Sterling changes according to trade deal news.

The pulse trade is small at the moment having become slightly overpriced to other protein markets.  Overall bean quality is not great this year, lowering the overall crop value.

 

Harvest Progress & Autumn Plantings

Harvest Progress

Normally at this time of year, the lion’s share of harvest is completed.  But with intermittent rain preventing significant progress in many parts and a considerable proportion of crops being spring sown, there is still ample to do.  A roundup of the harvest so fr is set out below.

Rather inevitably, it has been uneven, more so than usual.  In parts of the South and East, where more winter crops were drilled, harvest has progressed the most, indeed some might have all-but finished.  Further into the Midlands, West, North and Scotland, it is only just starting, partly as rain has hampered progress, partly because there is more spring cropping here.  Growers on lighter soils appear to have experienced greater yield reductions, suggesting the spring drought was more damaging to crops than the winter rains were; at least for those that made it through to harvest at all.  It’s an interesting turn of fortune with light-soil farms coming through the autumn drilling challenges well, but overall might have suffered greater yield reductions.

On the whole, many growers have a higher winter wheat yield than they thought likely back in February before the rain stopped, but many fields are patchy.  Most still agree yields will not quite reach the 5-year average.

Oilseed rape has been overwhelmingly poor and most opinions canvassed suggest a national yield of perhaps 2.5t per Ha will be as good as it gets.  The official yield will be affected by how much land farmers decided to re-classify as fallow or was re-drilled in the spring.  Plenty of farms drilled 120% of their farm this year; their failed OSR area eventually harvesting a crop of beans or spring oats.  Oats are looking well nationally, especially springs.  Windy rain might blow some yield from the ripe top heads.  Similarly, beans are looking good overall, especially spring beans.

This is a time for harvesters to consider the order of their harvesting. If multiple crops come ripe at once, not only should they consider the total value of the crop in the field, but the potential lost value from a 1-day delay in the field. For example, if beans and feed wheat are both ready to cut, the wheat might represent greater value per hectare, but the delay in cutting the beans might lose more value from discolouration than a similar delay in the wheat.

Autumn Drilling

So what are growers going to do this Autumn?  Most people are expecting a serious decline of OSR cropped area.  A lower drilled OSR area is very likely, but it is possible that for harvest 2021, the volume of OSR might actually increase.  We estimated a 25% write-off from this year’s OSR crop that did not reach harvest.  If next year, the percentage written off falls to a more typical 7%, then a decline in planted area from our estimate of 495,000 hectares in 2019 to a possible 410,000 this autumn would still leave more harvested winter OSR as the table shows.

Possible 2021 Oilseed Rape Area, ‘000 Ha

Many growers are removing oilseed rape entirely from their cropping.  Simply replacing it with another break crop may not solve the problem.  Other break crops such as pulses are available and offer soil and following-crop benefits too.  However, they might not demonstrate such high potential gross margins and could also become squashed in the rotation, affecting their long-term yields.  Some farmers are increasingly collaborating with nearby dairy or AD farmers to offer wholecrop rye, grass fields, as well as other cereals.  Interestingly, the harsh winter of 2012 led many cereal farmers to grow (spring) oats.  Their positive outcome meant that oat area has been higher than pre-2012 every year apart from one.  A surge in oat area this year too, might see something similar happen – depending on market demand.  Spring barley area has also been on an upwards trend with possibly a million hectares being harvested in the current year.  The gradual rise of spring crops can also be seen by a slow decline in winter cropping including wheat which, until 2008, topped 2 million hectares on a few occasions, and now averages 1.8 million.  Spring crops not only help tackle persistent grass weeds affordably, but are cheaper to grow and spread overheads at crunch times of the year.  Perhaps this year will accelerate this long-standing trend.

Arable Market and Harvest

UK Combinable Crop Harvest – What Should We Expect?

The harvest is in its early stages; for some the oilseed rape and barley is gathered, for others it has just been desiccated or is still ripening.  At this stage of harvest, without fail, commentators remark on the high variation of yield and quality.  The first fields always show variation in performance, and even in consistent years, the first fields present an unreliable bellwether for the rest of the harvest.  This is particularly as light southern soils often reach harvest before the heavier soils, and show greater yield variation, especially in years when drought has played a part in the year.  It would astound us if overall the combinable crop yields turned out high, especially the winter crops.  A good average yield of any of the main crops this year would either reset our expectations of what nature is able to do with plants in highly uncompromising conditions, or lead us to question the reliability of those calculating national estimates.

OSR

There will of course be some fields which just avoided being replaced in the spring, and harvest barely enough to justify the combine entering the field, but other fields will provide good crops.  Like all other crops, it is too early for any meaningful analysis.

Remember, the standard FOSFA contract for oilseed rape is for 9% moisture.  Oilseed rape is not accepted at moisture levels above 10% (or drying charges are incurred).  There is a gain of 1% in price for every 1% the moisture decreases to 6%.

Cereals

Some traders consider the winter barley harvest is 75% completed already (not the case round here by a long way – Ed).  Exports are taking place, both physical shipments and also orders.  UK feed barley is cheapest in Europe at the moment.  The demand for barley as animal feed (barley is generally for ruminants) seems to have dropped across some nations as people eat out less and therefore rely on white meats and vegetables in the home.  Demand for barley is thus down a bit.

Over the course of the last year, the price of wheat for this harvest has been gradually rising, albeit with considerable fluctuations from £140 to almost £170 per tonne on the futures market.  The prices for the 2021 harvest have remained highly range-bound between £150 and £155 per tonne.  The slowly declining UK and European crop size has been evident throughout the year, so prices have picked up, but so far of course, the crop for 2021 is unknown.

Globally

Most combinable cereals are grown in the Northern Hemisphere, so our harvest time will be more or less in line with most others.  Across the EU, harvest is quickly moving northwards.  In France and Germany, the two main grain producing countries, harvest is progressing in an average condition (not as well as last year).  The Russian wheat yield is reported as the smallest for at least 6 years, and smaller than initially projected.

Marketing

When it comes to marketing combinable crops this year, the focus may need to be more on the impacts of a Brexit than the actual marketplace itself.  Yes, we acknowledge similar comments were made following last season’s harvest and nothing happened, but Brexit has now occurred, and more importantly, a new trading situation will be implemented as of January next year.  This could possibly be trade with the EU without a trade deal.  These factors will affect the value of the marginal tonne (either exported or imported) which sets the price in the whole market.  We do not know the outcome yet, but farmers might consider this when planning on the date they fix the price of their grain (not necessarily the date of delivery).

UK Grain Harvest and Marketing Commentary

UK Combinable Crop Harvest – What Should We Expect?

The harvest is in its early stages; it started a little earlier than usual and for some, even earlier than last year.  Considerable activity until Thursday last week was seen with barley, oilseed rape and even some wheat reaching the barns, but the storms over the weekend have halted most harvesting. We expect a picture of a stuck combine in Friday’s Farmers Weekly as usual!

For much of the UK though, the crops are in a good condition, especially the cereal combinable crops and early indications suggest good yields (albeit early). The jury is still out for oilseed rape, although, whilst we have heard a lot about crop write offs and poor condition crops, there are still plenty of farmers sitting quietly on what looks like a full field of seeds. It is difficult to tell before the combine has been through. The storm over the weekend has flattened some crops at a very late stage which might cause some harvesting problems.

In much of Europe, particularly, France and Germany, the two main grain producing countries, the recent spells of very high temperatures have apparently taken a toll on the ripening crops. However, the crop tonnages forecast remain comfortably above the very poor yields harvested last year.

OSR

Oilseed rape harvest started before the storm.  Following the last couple of very dry days of last week, a few farmers had been harvesting very early in the day or trying to wet the seeds to a level that would be accepted by merchants. To recap, the standard FOSFA contract for oilseed rape is for 9% moisture.  Oilseed rape is not accepted at moisture levels above 10% (or you would incur drying charges).  You gain 1% in price for every 1% the moisture decreases to 6%.  Below that point, it becomes difficult for a crusher to extract oils so is rejected. If you are testing the seed and the moisture levels are heading down towards 6%, advice is to stop harvesting, and restart early in the morning (better than late in the evening because the moisture may have reached the seed rather than just the pod). Wetting oilseed rape is not recommended, as it is often uneven, rather, mix it with some wetter seed to make an average moisture within the tight band.

 Cereals

The barley harvest too is under way. It is early days and the better yields are always reported first so we reserve our judgement for a month. Barley harvest in France is a quarter through and moving northwards quickly. The very first wheat crops are starting to be cut now too, but it is too early to make any useful comments about it.  More next month.

Globally

Most combinable cereals are grown in the Northern Hemisphere, so our harvest time will be more or less in line with most others’. Across the EU, harvest is quickly moving northwards, with considerably better results than the poor yields from last year. The Black Sea region and Ukraine are also harvesting, with yields up on last season, although the Russian harvest is smaller than initially projected.  North America, the main breadbasket of the grain exporting world is wading through its winter wheat harvest, now being three quarters completed and in China, another large crop is being gathered.

Within a month, the analysts will start publishing their expectations of crop sizes, based not on planted area and trend yields, but more on actual reports coming in from the fields.

This all sounds rather bearish, and often is for a short period, whilst buyers identify what is available, in terms of quality, quantity and location. The calculators then come out and the premiums are established. We note that as the population continues to rise, the overall demand for grains is also increasing every year, and so to simply stand still, the world needs to harvest a record crop each year.

Marketing

When it comes to marketing our combinable crops this year, we should be more focused on the impacts of a Boris Brexit than the actual marketplace itself. Yes, we acknowledge we made similar comments following last season’s harvest and nothing happened, but there is still a chance that Brexit will actually occur, and more importantly, that it might do so without a deal.

Those with combinable crops to sell are reminded that exporters are not able to book sales to the EU post-Brexit day, because they do not know what the price will be (tariffs or no tariffs), so grain long-holders (farmers) should consider the risks and benefits of holding grain unsold into the autumn. Bear in mind that oilseeds have no tariffs so should not be affected by them, beans have only a low tariff and are mostly exported to non-EU destinations so should be similarly unaffected. However, the cereals are potentially holding a lot of value at the moment because the tariff structure protects them. We will probably have a surplus of feed wheat and oats this year so it might be prudent to pass the risk of these crops elsewhere sooner rather than later (i.e. selling them).

Grain Crop Commentary

Old Crop

Towards the end of the wheat marketing season, the impact of the fundamentals of grain supply and demand change, with some taking on greater impact, others less.  Firstly, the increasing amount of information over the emerging new crop overtakes the dwindling and ageing information about the remaining old crop, increasing the impact from new crop fundamentals.  Secondly, the volume of new crop wheat being traded, which is rising all the time surpasses the declining volumes traded of old crop.  This accelerates when the last old crop futures market expires as is the case now as we enter May (having entered the notice period for physical delivery of the underlying good).  Market fluidity also declines considerably when futures markets are not available.  The technicalities of closing the held contracts becomes a physical issue either having to physically deliver them or close the position.

This year, domestic wheat consumers are buying no more than ‘pipeline stocks’, as they are fully aware of the considerable discount (£16 per tonne) that exists between old crop and new crop, and that the price between the two crops must converge at some point.  On the back of the previous paragraph, they are aware of the forthcoming downside to the grain market; if physical grain will have to come out of the stores to honour the futures contracts already held, then this will prove a bearish factor on a thin and technical market meaning prices are likely to fall from here.  Indeed, the value of wheat has fallen over the month and this will probably continue.  It could well be time for long-holding farmers to sell the remainder of what they have in their barns.

New Crop

Rain in the UK has been gratefully received, but for most parts, its not enough.  However, analysts are reporting good crop conditions throughout the world and large global areas of wheat.  High levels of planted wheat in Canada and the US, and rainfall in the EU has raised crop expectations this month compared with last.  Speculators and funds are holding a considerable short position (i.e. the have sold what they don’t own, expecting the value to fall so they can buy them back cheaper).  It is maybe no surprise that the new crop is considerably lower priced than old crop.

Demand for feed barley has faded since Easter as the warm weather has provided a welcome burst of grass for the livestock farmers.  Coupled with this, many farmers have used Easter to clear their remaining unsold grain, placing downward pressure on feed barley values.  Volumes of export sales are small, and short term, as nobody is clear what tariffs will be charged on sales after Brexit.

Oilseed Rape prices have held up well in the UK this month partly on the back of a weakening Sterling. The underlying market, the US soybean market has fallen sharply, despite reduced forecast crop areas, and expectations of a resolution of the US/Chinese trade dispute that has been taking place in recent months.  Despite the UK OSR crop looking pretty poorly (see other article), globally the oilseed crops are in better fettle.  OSR is not a price setter itself as volumes are comparatively small compared with other vegetable oils such as soy bean oil.

The old crop Pulse market is now effectively over, and thoughts are now on the emerging new crop in the ground.

Cabbage Stem Flea Beetle

Many will have noticed there are considerably fewer bright yellow fields than last year, and some a much paler shade of yellow than their owners will have wanted.  Evidence suggests that in the UK a slightly lower amount of oilseed rape was planted last autumn than previous the year.  A considerable proportion did not have a good start, possibly in part as a result of the very dry soil conditions at the time, but also the concerns of Cabbage Stem Flea Beetle (CSFB).  This a meant an unknown quantity, but perhaps 8% of the national crop, written off before winter.

That which made it to the spring, is also in rather poor condition now, with another 5-10% being written off largely in the central and Western parts of England.  This will either be replaced with another crop or fallowed, or in some cases, left in poor condition, its owner resigned to the fact it will probably generate a poor yield.  It is concerning that reports are emerging that CSFB is having a damaging effect on the emerging sugar-beet crop too.  It is too early to speculate on yield impact, but we will continue to monitor this situation.

Ironically, reports from Lincolnshire suggest some bee-keepers are concerned there is insufficient OSR to supply enough nectar to produce honey from their hives.  Perhaps the loss of Neonicotinoids has had adverse impacts even on the insects that the ban was designed to protect.

What the impact of CSFB on OSR in the British farmer’s rotation in future might be is unclear, but many growers and agronomists have suggested their rotations and crop recommendations will not include OSR for at least three years.  The OSR area is in long-term decline; its area topped out in 2012 and has fallen every year since then apart from once.  In 2019 we could harvest the lowest rape area since 2004, and possibly the smallest crop since then too.

August 2018 Arable Update

The Wheat Market

Wheat price this morning (24th August) is a hefty £15 lower than at its high point of the season on the 8th August.  It is easy for sellers to become disheartened when they realise that they have missed the best prices.  However, only one trade is ever made at the very top of the market, and prices are still very good when looked at with a more long-term perspective.  This morning’s wheat price for nearby delivery has only been seen on 6% of the trading days since 2007; that is equivalent to one day out of three weeks.  Moreover, prior to this August, today’s nearby wheat price had not been achievable at all for over 5 years, so in fact, maybe it is a great price for sellers.  The chart below demonstrates that, since June, prices have risen by £40 per tonne; faster than at any time since the same period in 2010.  There are farmers selling grain forward who have never sold grain at this time of the year before and some selling next year’s harvest, before having drilled it. But probably not enough.

Drought conditions, it transpires, have clearly impacted on crop sizes throughout the EU, Russia, Ukraine and Black Sea countries (for example, Germany is expecting a wheat crop size 23% smaller than last year). There are concerns, largely by Russian grain traders, that the Russian authorities will impose export restrictions to manage domestic supplies; something they have done several times before.  Whilst nothing has been imposed yet, there are rumours of export limits of 30 million tonnes.  This would be 5 million tonnes lower than USDA export projections for the season, and 12 million lower than last year’s traded volume.  Curiously, Russia is likely to have harvested its third largest ever crop this season, but it is still 17 million tonnes less than last year.  This demonstrates how Russia has emerged very rapidly as a global agricultural power-house and the largest wheat exporter of 2017/18 and 2018/19.  Russian wheat production in 2017 of 85 million tonnes was far more than double their 2012 harvest, and exports were three times higher.  This explains why when a Russian official rumours a chance of trade restrictions, the market panics into an opportunity for sellers. Market fundamentals like this are so fickle and unpredictable, the market becomes highly volatile when they are happening, hence the dramatic price fall mentioned in the first sentence. The world is £15 per tonne happier about the availability of the 2019 harvest, than the current crop, in other words prices for next year are £15 per tonne lower at the moment.

Partly on the back of high feed prices, partly as lots of milling wheat varieties were drilled last autumn, and partly as harvest was gathered early, dry, heavy and bold because there was no rain damage this year, there is ample high specification milling wheat.  Milling premiums have collapsed to almost 30-year lows of sub £9 per tonne for full specification as a result.

Wheat Yields

The UK is likely to have harvested a moderate-to-average yielding wheat crop, possibly approaching 8.0 tonnes per hectare, not far from the national average of the last 5 years of 8.2 tonnes per hectare, when field edges and environmental areas etc. are considered.  We expect the UK to be a net importer of wheat yet again in 2018-19, making it the third consecutive year and fifth out of the last 7.   The UK continues to process more wheat each year, and the area planted is gradually falling, largely of course because of grass weed issues as well as marginal economics unless yields are high and costs low.

UK Wheat Supply & Demand

UK wheat export figures were published last week, confirming the 2017/2018 marketing year (2017 harvest) had the second smallest wheat export figure since winter wheat became the dominant crop in the UK over a generation ago.  The other year of such low wheat exports was in 2013, after the dreadful autumn rainfall, preventing many hectares from being drilled.  In 2017, the crop size was much more ‘normal’; it is just that it didn’t get sold and therefore exported.  Many farmers or traders are therefore still sitting on a considerable tonnage of wheat along the lines of 2.1 million tonnes, which is about 800 thousand tonnes more than is necessary for ‘supply chain continuity’ between harvests.  That might well have paid off this year, with domestic feed wheat values now a comfortable £40 per tonne higher than in the spring when the soils were still saturated.

Barley

Barley harvest surprised many people with positive yields and good quality.  Initial concerns from some of high screenings have been unfounded and nitrogen levels are usable for most requirements.  The UK will have a surplus, and so in the light of concerns of a ‘no-deal’ Brexit, some have considered selling all exportable goods this year.

OSR

The requirement for oilseed rape globally looks set to outstrip production this year, providing support for OSR to gain price lifts above that of the entire grains matrix.  However, it should be borne in mind that OSR accounts for only a small minority of vegetable oils output globally.  Most oilseed price fluctuation is based on political statements about breaking or resolving trade disputes, the outcomes of which simply cannot be known.

Autumn Drilling

Concerning autumn drilling for 2019 harvest, it is too early yet to provide hard evidence but we expect a continuation of the rise of spring cropping and possible continued experimentation with cover crops.  For wheat, the chart demonstrates a continued decline of wheat area since 2012, apart from the dreadful weather year of 2012. Whilst we believe this trend will continue long-term, we would also recognise that a ‘regression to the mean’ (small, 1-year increase) is also entirely possible.