Category: Arable

Harvest 2021

Following the poor crop of 2020, the harvest of 2021 was always likely to yield more positive results.  However, initial output figures from Defra were lower than some had expected.  The table below highlights the arable results from the 2021 Survey of Agriculture and Horticulture, showing crop production and area figures for the main crops in the UK.  The data is provisional, with final results due to be published on 16th December.  Figures for both Wales and Northern Ireland have been rolled forward from last season.

Wheat production was seen increasing by 45% year-on-year to just over 14 million tonnes.  This was primarily driven by a rebound in area following the difficult drilling campaign in 2020.  That said, average yields were lower than some had expected.  Yields in the south and east of England were seeming affected by the damp and dull summer.  Lower bushel weights and higher moistures were seen for many; Defra standardize wheat production to a 14.5% moisture.

For barley, lower production is no surprise, particularly given the large reduction in spring barley area.  The drop in area is countered by stronger yields, particularly for Scottish spring barley.  As a result, total barley output is just over 190,000 tonnes lower than the 2016-20 average at 7.1 million tonnes.

Once again, the challenges for oilseed rape (OSR) are evident.  With cabbage stem flea beetle (CSFB) still a huge challenge for many growers, the area planted to the crop fell to just 306,000 hectares.  This means the area planted to the crop has now fallen 399,000 hectares in the last ten years.  Even with an improvement in yield, production is seen below 1 million tonnes for the first time since 1989.  With OSR prices very firm at planting, will we see a rebound in acreage, despite the challenges of establishing the crop?

Oats have continued to gain acreage in recent years, owing in part to the challenges of growing OSR.  Production increased for the third year in a row.

Arable Market Update

With planting nearing completion for many, cereal and oilseed prices remain elevated.  Over the past month, UK farmgate feed wheat prices have gained £17.60 per tonne.  Values are supported by the tight global and domestic supply and demand situation.  The spot value of UK feed wheat futures reached £209.00 per tonne earlier in October.  While output prices remain high, it is also important to note that inputs for the 2022 crop remain expensive (most notably fertiliser).

At the global level, much of the attention for wheat remains on the strong demand picture, in the face of tight supplies.  The European Union had seen a strong start to exports, although the pace has slowed of late.  Early signs of waning demand for wheat in response to high prices has tempered the market.  Looking ahead, the Southern Hemisphere will be key.  Challenging, dry conditions were seen last year in South America, impacting grain and oilseed output.  With dry conditions continuing so far this season, the negative impact from the ongoing La Niña could see low output again and tight stocks.

The latest UK production numbers from Defra were released in early October.  UK wheat production is up 45% at 14.0 million tonnes.  But, with low stocks following last year’s small crop, domestic supply and demand looks set to remain tight throughout the course of the season.

Total barley production is down more than one million tonnes on the year, at 7.1 million tonnes.  The drop is mostly driven by the year-on-year reduction in spring barley acreage.  Despite the large fall in production, output remains only 3% below the 2016-2020 average.  As such, domestic supply will exceed demand once more this season  As a result, feed barley is at a £11.60 per tonne discount to feed wheat.  Barley needs to be priced to remain attractive into export and animal feed markets.

Globally, oilseed rape markets remain very tight after drought hit production in Canada.  Production is also limited in the EU.  As such, domestic delivered rapeseed prices remain well above historic levels.  Rapeseed delivered into Erith for November was quoted at £576.50 per tonne on 22 October, £57 per tonne up on the month and £215 per tonne ahead of last year’s level.

As mentioned, input prices remain elevated firm. While the CF Fertilisers’ plant at Billingham remains open following Government intervention, the supply situation remains tight.  Yara is reducing EU ammonia output by 40%.  Further, concerns over natural gas supply from Russia may heighten the situation.

New Oats Plant

What is claimed to be Europe’s largest oat processing facility is being built in the East Midlands.  Sited next to Camgrain’s existing store between Corby and Kettering, the plant will supply oat-based ingredients for the food and drink industry.  The mill will be run by ‘Navara Oat Milling’, a three-way joint venture between Frontier Agriculture, Camgrain, and Anglia Maltings Holdings (AMH).  The plant is due to be completed by 2023.  Following previous investments by the likes of Oatly, this demonstrates the rising interest in this crop. 

Arable Markets

The combinable crop harvest is mostly finished; what is probably the most expensive single capital item on the farm, the combine harvester, is back in its shed where it spends over 90% of its time.  The few days of work it does is critical, exciting but inevitably hugely expensive.

Wheat prices for 2021 crop have remained within their upward trend range, despite not recording an overall gain month from month. The current nearby futures feed wheat price of £194 is equal to that of this time last month, but between the two dates, prices have been £11/tonne lower. Currently, the present crop is teetering on contract highs, threatening to hit them this week. New crop (2022 harvest) is also at contract highs but prices have moved only £5/tonne in two months; its time will come.   Over 6 million tonnes of wheat have already been shipped from the EU, over 50% more than this time last year. There is not a 50% larger surplus, so this keen trade is pushing prices upwards, probably unsustainably. The US also has less wheat to ship this year by about 3 million tonnes. With China potentially buying European and US wheat, this is fuelling buying by speculators which is increasing the volatility in the market.

The current crop market is unsettled. Rumours suggest Russia is about to impose export taxes on its grains, making global supply tighter, The USDA is expecting less from Russia than initially predicted.  Dry weather in North America ahead of harvest also reduced crop yields by more than previous estimates in Canada, meaning the USDA publication also reduced production estimates for Canada. This has also fuelled the Oilseed rape prices, as Canada is the primary producer and exporter.

Barley prices are currently good, with brisk business occurring and a discount to wheat of only £7/tonne. A high quality harvest has given maltsters plenty of choice, and also picked up feed barley prices as less is available. Exports of spring barley into Europe are going well. Although some UK samples are high moisture which will keep them off boats.

Milling oats retain a £20/tonne premium over feed oats, sitting around £155/tonne spot for a clean sample.

Bean sales are picking up, but being a late harvested crop and a thin market, their trade is usually last to get going. Buying interest from Egypt, the largest grain buyer is high, although competition from the Baltic States is also present.

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.