Category: Arable

Beet Contract 2022

The beet price for the 2022 crop will be £27 per (adjusted) tonne.  This is a significant increase over the price for this year’s crop of £21.10 and £22.00 on the one-year and three-year contracts respectively.  These prices were themselves increased in February from the initial contract figures last autumn.  The 2022 prices will be a flat-rate with no market related bonus as seen in recent seasons.  Those growers already on existing multi-year contracts can move to a price of £25 per tonne if they contract for an additional year.

Other points agreed between the NFU and British Sugar (BS) under the Inter-Professional Agreement include’

  • the futures-linked variable price contract will be available to all growers.  This was trialled last year with a limited number of farmers.  Up to 10% of a grower’s 2022 contract tonnage can be sold on this basis.
  • a local premium is to be introduced.  This will pay an extra £2 per tonne for growers within nine miles of a factory, falling on a sliding scale to 10p for those within 28 miles
  • the Virus Yellows insurance scheme, introduced for 2021 will continue unchanged for 2022

The fact that the announcement comes so late highlights the difficulty the two parties had in reaching a price agreement.  The final figure was higher than the indicative price of £25 per tonne BS suggested in the summer, although not as high as the NFU asked for.  With buoyant prices for alternative crops and growing costs rising, a sizeable uplift was required to keep the area planted up.    

Genome Edited Wheat Field Trials

Rothamsted Research has been given permission by Defra to run field trials on wheat that has been genome edited.  The trials will be on CRISPR-edited wheat, which has been designed to have reduced levels of the naturally occurring amino acid, asparagine.  Asparagine turns into acrylamide when bread is baked or toasted which has been found to cause cancer in rodents and is considered as ‘probably carcinogenic’ to humans.  Since being discovered in 2002, acrylamide has been a huge problem for food manufacturers.  Rothamsted is planning a five year project, to end in September 2026 and it is hoped that asparagine levels in wheat can be reduced significantly without compromising the quality of the grain.  The Government consulted on the rules surrounding Gene Editing earlier in the year (see article https://abcbooks.co.uk/gene-editing/).  The response has not yet been announced but it could lead to new legislation in the UK , which would allow genome edited food products to be available to consumers.

 

 

 

English Crop Areas

Defra has released the first results of the June Survey of Agriculture – the most authoritative data on crop plantings.  So far only the results for England have ben released.  These are shown in the table below along with the past two harvests’ figures and the AHDB Planting Survey figures for 2021 which we commented on last month (only the English figures for the AHDB are included, rather than the full GB ones shown in July).  The recovery of the winter crops to their usual areas, after the disruptions of the the 2020 harvest year is confirmed.  The winter barley area is somewhat higher than previous estimates had suggested – largely at the expense of spring barley.  Oilseed rape plantings have fallen even more steeply for 2021 than thought.

Harvest Progress and Market Situation

The British harvest was start-stop in the first half of August, but in the last fortnight, considerably better progress has been made in most parts of the country.  The brief but frequent showers, enough to stop any harvesting for the day, appear to have reduced harvest quality to a degree.  This means there could be a greater than usual percentage of feed wheat and less milling grades.  Our crop projections and the recent planted area information from Defra (see other article) suggest a small wheat surplus meaning export parity for feed wheat and millers looking around for suitable samples for their grists.  Therefore, an increase in the price spread between feed and milling wheat grades might be expected.

Feed wheat prices have shot up another £20 per tonne this month.  This is because of serious weather problems in multiple grain-growing parts of the world.  Both North America (Canada and US included) and South America have had serious droughts this year decreasing the yields considerably.  Russia, another major grain producing and exporting country has also suffered from serious rain shortage and their crop harvest is emerging as much smaller than previously thought.  Not only have prices been increasing, buyers are looking to secure grains further ahead than usual.

Our uneasy weather has also extended into France, the EU’s largest wheat producer.  Reports suggest that wheat harvested in France is of generally lower quality than usual too.  This means that we could expect more feed wheat in Europe than normal, and consequently less milling wheat.  Again, this will only extend the milling wheat premium.  This year could turn out to be an exceptional year for some who have good yields, reasonable quality and market their grain well.

The oilseed rape market has also had an excellent month, back up to £500 per tonne delivered.  The underlying soybean market is rising fast with production difficulties in America.  Additionally, China, with the largest herd of pigs in the world (ever other pig is Chinese), has experienced its pig herd growing by a third this year alone.  Imports of soybeans are therefore rising fast.  On top of that Canada, the largest oilseed rape producer and exporter in the world is also facing difficulties.  It usually produces in excess of 20 million tonnes; current estimates suggest output will be 16 million at best this year, and possibly as low as 12 million; a massive reduction of global supply.  This bodes well for the few who grew oilseed rape this year.  We believe a considerably greater number of farmers are likely to plant it this autumn, in the hope of another good season.

Global Grain Balance

Global grain supply and demand is forecast to be well matched after the 2021 harvest.  The latest figures from the International Grains Council (IGC) shows production and usage at similar levels, both for ‘all grains’ and just for wheat.  The table below shows the figures.

The latest figures (for June) are compared against the first IGC forecasts for the 2021 harvest which were released in April this year.  The forecast production for all-grains has risen whilst that for wheat has declined slightly.  The latter is mainly due to the drought in North America.  Consumption forecasts have risen as the global economy recovers from Covid 19.  As is usual, the 2021 global harvest will be a record one – an ever-rising quantity of grain needs to be produced each year just to meet demand.

Despite the ‘balance’ in the overall grain market, it can be seen that the stocks situation is relatively tight.  This looks set to provide support to global values.  This will especially be the case if Chinese buying continues the trend seen in recent years.  

Producer Organisations

It is reported that transitional funding will be offered to Producer Organisations by Defra.   This will allow them to continue their activities supporting the fresh produce sector whilst a new ‘Horticulture Productivity Scheme’ is developed.  The sector feared a funding gap.

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

Harvest and Arable Markets

The harvest is in its early stages, with approximately a third of the winter barley in the Southern regions cut so far (it was three quarters this time last year).  At this stage of harvest, high variation of yield and quality is easy to observe.  We will refrain as 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.  However, reports from most regions suggest that conditions are good, yield potential remains high and certainly far better than last year for most growers.

UK wheat markets have risen by £5 over July, but it has been an up and down month.  This has taken other crops with it overall.  Across the world, harvest is moving North.  Most winter wheat in the US has been harvested now.  The springs in northern USA and Canada will be next.  These crops are parched and yields are expected to be low.  Yields across Europe are generally good though.

Every July/August, the world looks carefully to see how closely harvest matches demand and earlier projections.  We hear about dry conditions around the world and the fragility of the food supply chain comes to mind.  The harvest in the Northern Hemisphere over the next two months being so critical to the survival of the ever-growing population.  There is no room for complacency and severe global drought would indeed cause problems across many countries (half of all grain stocks are hidden in China).  However, a number of economists have been proven wrong throughout history by projecting the inability of agriculture to meet the needs of its population.  Currently, stock levels and crop conditions are good and the first real indication of such a situation would be a strong rise in grain values.  This is not happening as we move from old crop (import parity) to new crop (export parity), with the associated price adjustment as we move to exporting wheat again.

Oilseed rape harvest is pressing on, whilst the price is being pulled by good soybean crops in America (North and South) and very dry Canadian OSR/Canola crops.  Within a month, this will be cut and the impact will be assessed rather than estimated or forecast which is what the currently fluctuating markets are based on.

Potato Update

The UK potato crop has escaped the worst of the storms that hit mainland Europe, although very hot weather in some regions was not conducive to crop growth.  A mix of rain and warmth over the next two weeks should help crop development, but conditions are near ideal for the spread of blight and growers are having to spray regularly to stop the spread of the disease, which has been difficult during the wetter weather.

New crop potatoes have had some price support as stocks have been slow to come onto the market following the cold and late start in the spring.  There is limited demand for old crop types, despite the lateness of the new crop and prices of packing material have failed to increase significantly over the last few weeks.  The easing of Covid-19 restrictions and the increase in the number of staycations has helped processing and chipping potato demand, but warmer weather means there is less demand for maincrop packing types, although salad demand is relatively strong.

The loss of area data from the AHDB following the vote by growers to stop paying for its potato services means it is difficult to judge how many potatoes have been grown across the UK this year.  World Potato Markets initially assumed a 5% drop in area, but the decline might be a little smaller than that.  Any decline from the 2020 British area of 117,500 hectares would mean one of the smallest areas ever and average yields would result in a crop of little more than five million tonnes.

Planting in the European mainland is estimated to be down, with the area in the four main western potato-growing countries (Germany, France, Belgium and Netherlands) 4.5% lower to less than 500,000 hectares, according to the NEPG group of grower organisations from those countries.  Up to 20,000 hectares of potatoes were estimated to have been impacted by the storms that hit Germany, Belgium and Netherlands, although some of that crop is salvageable.

Demand for processing potatoes across Europe and further afield has returned to a certain extent but is not back to pre-pandemic levels.  An expected lack of potatoes from the European and US crop (which has suffered from record temperatures) and a further return in demand means the global potato market is much stronger than a year ago.  European old crop prices have increased along with futures prices for the 2021 crop.

Beet Price 2022

British Sugar has announced the beet price for the 2022 season will be a minimum of £25.   This compares to £21.10 being paid for the current crop (under one-year contract terms).  The idea behind the company releasing an ‘indicative’ price before negotiations are complete seems to be to persuade growers to keep beet in the rotation as they plan their cropping decisions for the autumn and next spring.  The NFU is holding out for a higher contract price.  In recent years a contract price has not been announced until September.