Category: Arable

Beet Advance

Sugar beet growers will be offered a 25% advance payment on their 2022 crop.  It is an acknowledgement of the cashflow pressures farmers are under.  Growers will have to opt-in for the advance payment, which will be made in the third week of June.  Based on the 2022 contract price of £27, it will be worth £6.75 per tonne.  The tonnage will simply be based on the growers Contract Tonnage Entitlement (CTE).  The advance will only be available to farmers who have held contract tonnage for the past three years, although British Sugar states that other growers should discuss their situation with account managers.

UK Grain Market Update

UK grain markets have, unsurprisingly, followed the global direction in prices over the last month.  Wheat prices are higher, month-on-month, although wheat futures are lower than recent highs. Ex-farm feed wheat (spot) was quoted on 20th May at £326 per tonne, with a milling premium of £27 per tonne.

AHDB crop condition figures showed crops to be in good health through to the end of April.  Some 83% of winter wheat and 84% of winter barley rated as ‘good’ or ‘excellent’.  There has been rainfall across much of the UK in May.  However, rainfall in England was still behind the long-term average for the month, up to the week ending 17th May.

New crop UK feed wheat futures are also considerably higher than a month ago.  On 23rd May November-22 futures closed at £332.50 per tonne, up almost £45 per tonne on the month. Challenging conditions for crops in the US and EU are combining with ongoing uncertainty in the Black Sea region.

Prices for the 2023 crop have also risen.  November-23 feed wheat futures closed on 23rd May at just over £271 per tonne, up almost £20 per tonne on the month, but down from a high of £295 per tonne on 16th May.  The direction of the 2023 crop is uncertain at present, especially with limited futures trade.

Ex-farm feed barley prices also increased during the month, but only marginally.  The feed barley discount to feed wheat was quoted at almost £22 per tonne on 20 May, driven by a lack of interest from both buyers and sellers.

The price of oilseed rape has fallen in recent weeks, but nearby prices were still in excess of £819 per tonne, ex farm. Recent market reports highlight further falls in delivered prices for both harvest 2022 and 2023, with the latter now quoted at £580 per tonne delivered into Liverpool. This reflects Indonesia lifting its palm oil export ban.

Pulse prices had lagged behind the rises seen in other commodities.  However, feed bean values increased by £26 per tonne across the month, to £328 per tonne.  Premiums for new crop beans are squeezed.

Global Grain Markets

Global grain and oilseed prices remain high.  Whilst a key driver is the war in Ukraine, there are also a number of other factors at play; there are concerns for crops in the US, EU, and India which are supporting new crop values.

EU Crop Conditions

Conditions in continental Europe have mirrored conditions in the UK.  Many countries, including France, Germany, and Romania have experienced a lack of rain.  For France and Germany, two key grain and rapeseed producers this situation does not look like changing before the end of May.

French agency FranceAgriMer has downgraded its view of winter cereal crop conditions.  The EU crop monitoring report from the EU Joint Research Centre, published on 23rd May, further highlights the challenge of dry conditions but is still optimistic on yield impact.  If conditions remain dry, a yield impact is to be expected, this will support the global grain price.

India

India has grown in importance to global grain markets in recent years.  The third largest wheat producer in the world, after the EU and China, is forecast to export 8.2 million tonnes of wheat in 2021/22, rising to 8.5 million tonnes in 2022/23.  However, dry conditions over the past couple of months has sharply reduced forecasts of output for the 2022 harvest.  This has prompted the Indian government to ban exports of the grain. However, immediate concerns were softened, with sales to countries with irrevocable letter of credit to be honoured.

USA Crop Conditions

While US winter wheat crop conditions are unchanged on the month, they continue to be a concern.  Drought conditions are observed in some of the key wheat producing states and also in parts of the High Plains (important for spring wheat).  Maize plantings are also lagging behind the five-year average, as are spring wheat plantings.  This is most notable in North Dakota, which produces more than 50% of the US spring wheat crop (6.9 million tonnes, 2017-2021 average).  Crop conditions in the US will be watched closely over the coming weeksa and will be a key driver of grain prices.

USDA Supply and Demand Estimates

The USDA published its latest Supply and Demand estimates on 12th May.  The report included the organisation’s first forecasts of the 2022/23 crop.  Both the maize and wheat supply and demand balance are expected to tighten.

The stocks-to-use ratio for wheat is forecast to be the tightest since 2014/15 at 34.1%.  However, China is also expected to accumulate more stocks in 2022/23.  Excluding China from the analysis tightens global wheat stocks to the tightest point since 2007/08.

For maize, global stocks-to-use is seen falling slightly year-on-year.  Conversely, global maize stocks-to-use, excluding China, is set to rise.  This may add some downward pressure to maize prices, widening the gap to wheat.  If the gap is favourable for consumers, this may also undermine wheat prices slightly.

 

UK Arable Markets

UK winter arable crops are looking in good order, according to a recent AHDB Crop Condition Survey, conducted at the end of March.  That said, March was drier than normal, a trend which has continued through April.  The long-range weather forecast suggests dry weather will continue for most areas of the UK.  This may start to impact potential yield if it carries on for a few more weeks.

UK arable markets have followed the global trend.  Nearby ex-farm feed wheat prices gave moved up to £308.20 per tonne in the week ending 22nd April 2022. Prices had fallen coming into April but have gone on to set new highs.

The price of ex-farm feed barley has narrowed the discount to wheat throughout April.  In the week ending 22nd April, nearby feed barley was quoted at £303 per tonne.  Wheat and barley prices have now risen by more than £83 and £94 per tonne respectively since Russia’s invasion of Ukraine.

The rise in prices has helped to offset some of the rise in input costs, with fuel and fertiliser experiencing sizeable uplifts.  There are indications that the price of ammonium nitrate has now fallen back from recent highs.  But high input costs will still represent a significant challenge for the 2023 crop.  New crop UK feed wheat futures have been trading at around £250 per tonne since the middle of April.  This may offer a useful hedge against high input prices for the coming season.

Most arable farmers will have already ordered their spring fertiliser – often some months ago.  There have been reports of availability issues for orders made this spring.  However, there is currently no shortage of fertiliser in the UK.  In fact, the main UK manufacturer is having trouble selling what is producing (perhaps not surprising given current prices) and is exporting considerable tonnages.  The issue with delivery and long order times are mainly for those ordering part loads and are largely due to logistics.  Those with a less-than-stellar credit history may also struggle.  Manufacturers and merchants are having to deal with their own cashflow pressures and do not want any bad or late debts.   

Rapeseed prices have also risen, with Ukraine a key producer of sunflowers and rapeseed.  Ex-farm oilseed rape prices are quoted at more than £845 per tonne; a 40% increase since 25th February.

One crop that has not seen the same degree of price rise is beans, which were quoted at £302 per tonne, ex-farm. This is the first time beans have been quoted at a discount to barley since December 2006, demand for feed beans by UK consumers is reportedly lacking.

Global Grain Markets

Arable markets have continued to react to the ongoing conflict in Ukraine.  May-22 UK feed wheat futures have moved up further, now trading around £320 per tonne.  In the short-term, prices for commodities and inputs will be driven by uncertainty in Ukraine.  The re-escalation of conflict in the east of the country, where much of Ukraine’s wheat and barley crop is grown, will continue to drive prices.

While the war in Ukraine has been the key driver of grain markets over the past three months, there are also other factors driving prices.

Severe drought in parts of the US wheat belt, has seen US wheat crop conditions rated poorly.  In the most recent USDA report (18th April 2022) 37% of the US winter wheat crop was rated as being in ‘poor’ or ‘very poor’ condition, the highest proportion for this time of year since 2018.  Difficult crop conditions at this time of year do not guarantee low production, in 2018 yields in the US, whilst down, were ahead of the five-year average even after crops were rated poor earlier in the season.  However, the crop needs rainfall, which looks lacking at present.

On top of the concerns for the US wheat crop, the US maize crop is also getting smaller.  Reports suggest farmers in the US are opting for soyabeans over maize, driven by lower costs of production.  The combination of a smaller US winter wheat crop and smaller than expected maize crop will support new crop grain prices.

The latest International Grains Council (IGC) supply and demand estimates, support the view of tight markets.  World grain closing stocks are forecast to fall by 26.5 million tonnes from 2021/22 to 2022/23.  Major exporters’ closing stocks of grain drop by 14.2 million tonnes.

It is worth adding that owing to the situation in Ukraine, all forecasts should be treated with caution.

GM Barley Trials

Field trails of a genetically modified barley have been approved by Defra.  The study will use gene-editing techniques to investigate the role of existing barley plant genes that interact with soil microbes.  The aim is to make the plants more efficient users of soil nutrients and reduce the need for artificial fertilsiers.  The trials will take place over the next five years at three sites of the Crop Science Centre; a partnership between the National Institute of Agricultural Botany (NIAB) and the University of Cambridge.

Loam Farm Update

Last month we reported on how difficult it is to budget at the moment due to the sudden and large rises in costs and prices.  But it is important that budgets are revisited.  We presented the updated figures for Friesian Farm last month and this time we look at Loam Farm.

The table below shows the results for harvest years 2020 and 2021, a provisional figure for 2022 and a forecast for 2023.  For harvest 2022, fertiliser was purchased last summer, i.e. before the recent price hikes.  The farm therefore shows spectacular profits for the year as a result of the high sale prices likely and (relatively) low costs.  For harvest 2023, the significant increase in variable costs can clearly be seen, together with overheads – partly driven by fuel but also labour, machinery and general overhead costs.  This results in the margin from production becoming negative.  The fall in BPS is starting to ‘bite’ but is mitigated by involvement in the Sustainable Farming Incentive (SFI).

Loam Farm is a notional 600 hectare business that has been used since 1991 to track the fortunes of British combinable cropping farms.  It is partly owned and partly rented and is based on real-life data. It has one full-time worker and employs harvest casual labour.

Arable Markets

A week is a long time in politics, and given their intertwined nature at present, so too in grain markets.  As the war in Ukraine enters into its second month, the impact on grain and oilseed markets has been considerable.  This is not surprising when we consider the reliance the world has on both Ukraine and Russia for grain and oilseed supplies.

The Food and Agriculture Organisation (FAO) of the United Nations held an extraordinary general meeting earlier in March, to discuss the challenge of the war in Ukraine.  The report from the meeting highlights 26 countries which rely on Russia and the Ukraine for more than 50% of their wheat imports.  Some of those nations will be relatively small importers.  However, it is worth noting Egypt, which imports more than 15 million tonnes of wheat annually.  Historically, 70% of Egypt’s wheat imports have been sourced from the Black Sea.  Whilst we can expect markets to be volatile long after the end of the war, much will depend on how the nations who rely so heavily on Russia align themselves politically going forward.

Farmgate grain prices have risen considerably over the course of the last month.  Nearby farmgate feed wheat was worth £292.90 per tonne on 18th March, up £69.40 per tonne from 25th February.  The value of farmgate prices has been driven by futures market volatility.  This is, in turn, making markets challenging to price.  Milling wheat prices have also seen increases, although the premiums over feed wheat have remained relatively stable.  Feed barley values have also increased considerably, following the direction of wheat markets.  Farmgate feed barley increased £67.90 per tonne from 25th February, up to £277.80 per tonne on 18th March.

Outside of the conflict in Ukraine, the grain market would likely be seeing support anyway.  Dry conditions over winter in the EU and US, will cause some concern on wheat markets.  Drought conditions are also seen in North Africa, if this persists, we can expect increased import demand globally.

Oilseeds prices have also risen considerably in recent weeks. Paris rapeseed futures (May-22) traded at more than €1,000 per tonne on 23rd March.  As with grains, there is a global reliance on the Black Sea for rapeseed and sunflower oil.  Ex-farm UK oilseed rape prices were quoted at £742.50 per tonne on 18th March.

Pulse prices have also gained over the last month.  However, the gain in the value of pulses has been limited compared to that in grains and oilseeds.

Sugar Beet Contracts

British Sugar has announced all contracts, irrespective of length, will receive at least £27 per tonne for the 2022/23 crop year.  On making the announcement. the processor acknowledged growers were currently exposed to significant cost inflation and that sugar prices were also rising.  It said it had worked closely with NFU Sugar to understand growers’ likely costs for the coming year, which had made it come to the conclusion that a guaranteed price was required to ensure sugar beet remained an economically viable crop for everyone.  The guaranteed £27 per tonne will apply to all contracts for the crop which is about to be planted.  Any growers with a fixed contract price below this amount will have it raised to £27 per tonne.  Those whose contracts include a market bonus element will received a guaranteed market bonus of £5.82, raising their price to £27 per tonne on delivery.  Any surplus beet for the 2022/23 crop will also be paid at £27 per tonne.

Neonics for Beet

Defra has announced that the ’emergency’ authorisation of Syngenta’s Cruiser SB seed treatment for sugar beet has been granted for this year.  Used to control Yellow Virus, our article of 25th January (see https://abcbooks.co.uk/neonic-beet-treatment/) detailed that the use of the neonicotinoid would be dependent on nine conditions being met.  This included an initial threshold for use, meaning the seed treatment can only be used if the predicted Yellow Virus incidence is at or above 19% of the national crop on 1st March.  According to Defra, following what has been a relatively mild winter, modelling on 1st March is predicting a 68% (!) level of virus incidence.  In 2018, 25% of the national sugar beet crop was lost to YV, with an estimated cost to processors and growers of £67 million.