Category: Arable

Combinable Crop Markets

The current UK wheat crop of an estimated 10.1 million tonnes is augmented this year by 1.2 million tonnes more imports than last year (over half a million more than usual) and higher carry-over stocks by about half a million tonnes.  The market has always priced the 2020 harvest crop higher than 2019 with a full carry (prices continue rising) from the end of the 2019 delivery period into the 2020 season.  For that reason, more people did not sell their old crop, but kept it into this year.  The opposite is already taking shape for 2021 crop, with a drop of over £40 per tonne for delivered wheat before harvest and shortly after.  Clearly there will be as little carry-over as possible.

Old crop wheat peaked this month at £214 per tonne, a great price to sell at.  However, only one person gets any business at the peak of the market, and that might have been a speculator, not a farmer and might have been a single lot (100 tonnes).  Prices have since declined to a still respectable £205 per tonne.  For those with any crop left unsold, selling at this level should be seriously considered.  As well as the reduced 2020 harvest, the continued weakness of Sterling is helping to buoy domestic prices.

Barley has also risen this month, but the price spread with feed wheat has remained close to or over £50 per tonne – an gap that is almost unheard of.  The new crop price spread is inevitably smaller with less barley and more wheat likely to be harvested.  Nevertheless, it is still between £15 and £20 per tonne, historically quite high.

Oilseed prices have also lifted with the rise of cereal prices worldwide, with OSR gaining £15 per tonne this month at one point.  Pulse prices are currently in a high position, compared with the range they tend to occupy, but arguably low compared with the current wheat values.  They are cheap in the current matrix, but there is a maximum inclusion rate in many compounders’ recipes meaning demand is capped regardless of price.  It will not be long before the generous Australian crop reaches a European harbour, then the value of local beans might fall a bit.

Neonicotinoid Authorisation

Sugar Beet producers will be relieved to hear Defra has authorised the emergency use of neonicotinoids on sugar beet seed in 2021.  The authorisation is for the use of Syngenta’s Cruiser SB seed treatment in England only, once a threshold for virus levels has been reached.  The emergency authorisation has strict conditions attached including:

  • the application rate will be below the normal commercial rate
  • no flowering crop is to be planted within 22 months of the sugar beet crop, with no oilseed rape crop to be planted within 32 months (no clarification whether this is from planting or lifting of the crop)
  • an industry-recommended herbicide programme must be followed to limit flowering weeds in and around the sugar beet crop.

In 2018 there was an EU wide ban on the use of neonicotinoids, which the UK said it would continue to adhere to once we left the EU.  But in 2020 Virus Yellows disease has had a significant impact on the UK sugar beet crop, with total production forecast to be 25% less than year earlier levels.  This led to British Sugar and the NFU lobbying for an emergency authorisation.  The Secretary of State has decided that the requirements for the emergency authorisation have been met and England joins a number of other countries with have granted emergency use, including Belgium, Denmark and Spain

Gene Editing

Defra has launched a consultation on the rules surrounding Gene Editing (GE).  Announcing the consultation at the Oxford Farming Conference, George Eustice said ‘now that we have left the EU, we are free to make coherent policy decisions based on science and evidence’.  At the end of the Transition Period on 31st December 2020, the EU legislation controlling the use of Genetically Modified Organisms (GMOs) was retained in the UK (similar to a number of other pieces of legislation).  The GMO legislation required that all GE organisms are classified as GMOs irrespective of whether they could be produced by traditional breeding methods.  It is Defra’s view that organisms produced by GE or by other genetic technologies should not be regulated as GMOs if they could have been produced by traditional breeding methods.

The NFU has welcomed the consultation, describing new breeding techniques such as GE as ‘absolutely critical in helping us achieve our climate change net zero ambition’.  The consultation which can be found via The regulation of genetic technologies – Defra – Citizen Space  is in two parts.  Part 1 focuses on the regulation of GE and Part 2 will start to gather views on the wider regulatory framework governing genetically modified organisms (GMOs).  Responses need to be made by Wednesday 17th March 2021

Vydate Loss

Vydate has not been reauthorised for use in the UK as from 31st December 2020.  The pesticide, which is vital, not only in the control of potato cyst nemotode (PCN), but also used to control pests in carrots, parsnips, bulb onions, garlic and shallots can no longer be used, sold or distributed in the UK.  The decision was made just one week before authorisation ended and only gives until February 28th 2021 to dispose of any product.

Vydate was particularly important in the control of PCN in short-season potato crops as it had an eighty day harvest interval compared to the remaining two active ingredients which have much longer restriction period and therefore will not be viable for these crops.  The AHDB has submitted requests for emergency approvals for Vydate users where there is a lack of alternative pest control options.  We will endeavour to keep readers updated with the outcome.

 

Sugar Quota

The UK sugar industry faces increased competition after it was confirmed that additional tariff-free imports will be allowed.  As we wrote in July, the Government was proposing to introduce a Autonomous Tariff Quota (ATQ) allowing in 260,00 tonnes of raw sugar per year without having to pay the UK’s import tariff of £280 per tonne.  It has now been confirmed that the quota will be enacted.  This is likely to increase price pressure in the UK market as low-cost cane sugar competes with UK beet.  The Government argues that this volume will merely replace sugar imports from the EU.  With the Brexit deal, however, then EU sugar can continue to come into the UK tariff-free too.

NI Protein Payment

Northern Ireland is planning on introducing a coupled payment for growing protein crops.  A consultation for a pilot scheme in 2021, on a maximum of 1,000 Ha, suggests a payment of £330 per Ha.  This would be payable on beans, peas and lupins.  Northern Ireland only grew 153 Ha of such crops in 2020 and the new payment is designed to reduce the reliance on imported soya as well as encouraging more sustainable crop rotations.  Although none of the other home nations has indicated it is looking at such a payment, the whole UK has a significant protein deficit.  It will be interesting to see if this initiative changes cropping noticeably.  The full consultation can be found at – https://www.daera-ni.gov.uk/consultations/daera-consultation-proposal-introduce-protein-crops-payment-pilot-scheme-2021

UK Global Tariff Amendments

The Department for International Trade (DIT) has announced technical changes to the UK Global Tariff (UKGT) for 27 products, mostly in the cereals and arable sector.  These changes are primarily being made to ensure consistency within the UKGT schedule and to take account of new information which has come to light since the original UKGT was published in May. Selected changes include;

  • Barley flour: £143 per tonne tariff to apply to ensure product consistency, the previous UKGT was set at 0%. 
  • Maize flour: set at £82 per t, up from the previous UKGT of 0%.
  • Oat flour: £137 per t, previous UKGT rate was again 0%.
  • Maize pellets: £144 per t, again up from 0%.
  • Barley pellets: £143 per t, also up from 0%.
  • Wheat pellets: £146 per t, previous UKGT rate was 0%.
  • Sugar beet seed: tariff now set at 0%, previous UKGT rate was 8%.

Most of these changes mean that the new UKGT will be more closely aligned to the EU Common External Tariff (CET).  The main exception being sugar beet seeds which has seen its tariff liberalised.  There are several other changes relating to products such as basmati rice, olive oil and non-alcoholic beer.  Further detail is available via: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/944733/UKGT-Amends-tariff-change-announcement.pdf

Sugar Bonus

Sugar beet producers should receive a 2.6p per tonne bonus in December.  The average EU + UK sugar price in September was €376 per tonne.  Although down €2 per tonne from August, this still sees the one-year contract bonus triggered for 2019/20 (2019 crop).  This is the first time the market mechanism will have been paid out since it was first introduced in 2017.  Although not transformational, the NFU calculate it is worth about £73,000 in total to growers.  Payment should be made in December by British Sugar who will contact growers with the exact price and tonnage.

December Arable Markets

Looking out onto a very soggy Leicestershire, it seems that this November and December might have been as wet as the last.  The difference is that, this year, most winter crops have been drilled already, and, on the whole, established better than last year too.  Certainly, in this part of the East Midlands, if something has not been drilled by now, it has little chance now until the spring – a similar scenario to last year.  There have, at least so far, been few frosts and cold icy mornings, perhaps the New Year will treat us to some.

Monthly publications about global crop production and demand at this time of year tend to be rather dull; there are few new crops to report on or harvest progress reports, just a few comments on how much winter crops appear to have been drilled in the Northern hemisphere.  These publications only gradually improve the already available data with tweaks here and there meaning price changes are less dramatic than in spring or summer.  Statisticians and economists therefore tend to have less of an impact on grain prices than politicians and currency brokers.  It is Politics this month that lead the UK market swings.  No grain exporters are brave enough to sell consignments of grain that might end up having a prohibitive tariff on it (the tariff is charged at the point of export, rather than the point of sale) so selling for delivery after New Year is a game of commercial roulette.  So we await news of a trade deal with Europe which, as the article above points out, is very close to completion, yet potentially miles away.  In addition, we also need to know about the Tariff Rate Quotas that could make a dramatic difference, for example to the 1 million tonnes of surplus barley the UK has stockpiled in barns.  Over 400,000 tonnes of barley had been exported to the end of October, but this has not continued at the same pace since then due to the uncertainty on the trade rules.  The spread between feed wheat and feed barley remains substantial.

The African Swine Fever that swept through China does not appear to have had any affect at all on the demand for soybeans that, it was understood, was fed to the pig herd.  China is importing more beans this year than ever before, and that is tipped to top 100 million tonnes, almost two thirds of all global trade.  Demand for oils is strong, and with a small oilseed rape crop in the barn and in the ground in the UK, the price has firmed.

The pulse market is relatively thin.  This can work in favour of the seller (the farmer) and against.  Over the last couple of months, prices have been high, and offered good opportunities for farmers to make high gross margins.  But the few buyers have stopped buying and prices have fallen considerably.  It could get worse, in some cases in thin markets crops can be hard to move at all.  Buyers are now covered until the New Year when they might enter the market again.  At least pulses are not really affected by Tariffs, having low rates and exports mostly go outside the EU.

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.