Category: Arable

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.

Potato Roundup

It was another wet potato harvest for growers this year, but not so water-logged as last year when crops went unharvested.  The AHDB’s first production estimate is a crop of 5.318 million tonnes, 3.1% more than last year, with average yields of 46.2 tonnes per hectare – the highest since 2017.

So far this season, sales have been steady, with increased packing potato demand continuing because of the second round of lockdowns.  Processing potato demand is still down because of restaurant closures and even fish and chip sales are lower despite them being allowed to remain open.  The AHDB believes that overall potato demand may be 4% higher in 2020 than 2019, with higher fresh potato sales outweighing the decline in out-of-home sales.  Current free-buy prices are averaging £123 per tonne, about £75 per tonne less than a year ago.

Brexit uncertainty still weighs on the market.  Tariffs would mean frozen fry trade would attract a 14% duty, although as the UK is a large net importer of products, that would hit Dutch and Belgian suppliers harder than British exporters.  As it stands, the UK will not be able to export fresh potatoes (seed or ware) to the EU whether there is a Deal or not as it does not have the relevant third country certification and will not be able to apply for it until after 1 January 2021.  There is still confusion over whether this applies to trade between Great Britain and Northern Ireland, which in the Single Market.

Another issue of concern is storage quality.  This season has seen the banning of anti-sprouting chemical CIPC which has meant growers need to use more expensive alternatives or risk breakdown of their crops in store.

The AHDB is facing a vote of its of its potato levy-payers on the future of the levy in the sector.  It was triggered by more than 5% of levy-payers supporting a ballot.  The AHDB itself says it will run a series of virtual events to ensure that voters know what research, knowledge exchange, market information and marketing supports it delivers the potato industry.  The vote opens in mid-February and last for four weeks.

Low Sugar Harvest

British Sugar (BS) has reported that sugar yields for this year’s harvest look set to be even worse than expected.  The announcement was made by the firm’s parent company Associated British Foods at its Annual General meeting.  It believes sugar production will be nearly 25% lower this year at 900,000 tonnes compared to the 1.19m tonnes harvested in 2019.

Last month, the company was predicting a decline in sugar output of 10% but, as harvest as got underway, the effects of the virus yellows disease has been found to be greater than thought.  Yields from some fields have been halved.  According to BS, growers in the areas supplying the Wissington factory in Norfolk have been the worst affected.

The Global Grain Market

The UK wheat market may have risen in a straight line since August, but prices elsewhere have been up then down.  The spread between UK and US comparable prices has grown from about £13 per tonne in mid-October to almost £30 per tonne now.  A price differential like this is unusual and not likely to last long.  UK wheat (standard UK wheat is a feed specification) will not be cost effective to export.  Not a problem I hear you say as we don’t have a surplus, but on the basis that a million tonnes of high protein hard wheat from North America is imported every year, that shortage closes quite a bit.  Exporters have the contacts, skills and infrastructure to become importers and whilst it will be slower than their traditional exports, for £30 per tonne, they will find a way for sure.  This suggests that unless the world price is about to rise too (not much evidence of that) then the UK wheat values are teetering on a price spike.  Clearly we could be wrong, but selling feed wheat at not far short of £200 per tonne is not a bad price to be wrong at.  For new crop, UK wheat is at a discount to Chicago prices, but the gap is closing.

There are lots of reports of drilling progress around the world, updates of old crop harvest tonnages and weather conditions, each one, pushing global prices up and down.  The fall of the EU exportable surplus is concerning UK processors, not knowing where their balance will come from, and indeed yet, what the tariff might be come 1 January.

China has been busy buying up lots of French malting barley, and the European malting market has been active, with some good prices. In the UK, it is quieter, with the Brexit tariff uncertainty interfering with trade decisions. Barley and malt prices for the 2021 crop are already looking more promising than old crop values, as we would have expected.

 

UK Arable Situation

Whilst the barn is not as full as most years, because of low cropped areas and poor yields, those whose wheat remains unsold have been making money from it.  In fact a tonne of wheat has risen by £25 per tonne since harvest.  This means,  for an average yielding hectare of a meagre 7.2 tonnes this year, a rise of approaching £200 per hectare.  That sounds easy, but of course, a large percentage of the wheat never got drilled, and probably, a greater percentage of it than usual was forward sold.  Nevertheless, it is some comfort for those holding stocks.  The AHDB’s Cereal Quality survey confirms the proportion of quality wheat (full specification) is lower than usual too at 32% compared with the 5-year average of 37%.

Feed barley remains at a hefty discount to feed wheat of over £40 per tonne, with lots sloshing around the system.  Not only did the total barley area come close to the wheat area, but the malting varieties in East Anglia averaged high nitrogen levels (1.89%), slightly above the standard for export brewing (1.85%) meaning much is feed barley grade.  Nitrogens were lower in Scotland.  French malting barley is excellent this year.

This time last year, we reported how the British drilling season had halted with only half the winter crop in the ground, many farmers having shut up shop till spring, and many with serious concerns about flea beetle in their oilseed rape.  Conditions have been substantially better this year, but still not great.  Whilst not as wet as 2019, rain has caused several disruptions and drilling is a few percentage points behind where farmers would ideally like to be.  Some establishment has been slow because of waterlogged soils, especially in the heavier land areas.

We also mentioned some farmers had publicly stated they would not grow oilseed rape again.  This does appear to have been carried out, with perhaps even less OSR planted than was harvested in 2020 (quite a drop, because as much as a quarter was written off before harvest).  Establishment is quite good, but on the basis that every year now, some will be lost, we could have an OSR harvest smaller than we have had since the 1980’s.  In terms of planted area, it will remain larger than oats, pulses and maize, but OSR is of less importance in the UK rotation now than just a few years ago.  Pulses appear to be compensating for the lost area, but only partially, with other changes such as increases in second wheats and oats (particularly spring).

Pulses are have a small surge in popularity, both on the back of the point made in the previous paragraph, but also as new crop prices are strong, especially peas.  Both Blues and Marrowfats are offering excellent prices for those who can get a contract and a half decent clean yield at circa £270 and £320 per tonne respectively.  Old crop premiums are not as good though.

Glyphosate

The use of Glyphosate is likely to be extended until 15th December 2025 in Great Britain after Brexit.  According to Darren Flynn, head of the Chemical Regulation Division (CRD), all active substances due to expire between 1st January 2021 and 31st December 2023, will be given a 3-year extension under the new GB pesticides regulations.  As the current EU expiry date for Glyphosate is 15th December 2022, the three year extension should apply to it.

The three year extension is being allowed so the new GB Active Substance Renewal Programme has time to be developed.  But it should be noted, the Health and Safety Executive continues to have the power to review approvals at anytime if new evidence shows a substance is harmful to human health or the environment.  The extension only applies to Great Britain and not Northern Ireland as the NI Protocol to the Withdrawal Agreement means the EU’s Plant Protection Regulations will continue to apply.

Sugar Beet Harvest

British Sugar is forecasting a reduction of ‘well over’ 10% in sugar production for the current campaign compared to last year’s 1.19m tonnes.  The update was announced in its parent comapany, Associated British Food’s, annual results.  The 103,000 hectares of sugar beet grown in England this year, struggled when planted due to the dry spring and has suffered from virus yellows throughout the growing season.  Without neonicotinoid seed treatments, there is very little in the chemical ‘tool box’ to control virus yellows.

It is a similar story in continental Europe.  EU sugar prices have been on the rise this year, due to a reduction in stocks following two years of decreased production.  Looking ahead, EU sugar production for the 2020/21 campaign is forecast to decline again due to reduced yields.  As in the UK, this is due to a combination of adverse weather conditions throughout the growing season and the prevalence of virus yellows.  EU production is estimated to be below consumption for the next marketing year.

In France, where there are reports yields are down between 25-50%, there has been an easing of the neonicotinoid ban to try and save the sector.  In the UK, industry has been lobbying Defra to try and get a similar derogation, but there has not been any response as yet.

Ban on Urea Fertiliser?

Defra has launched a 12-week consultation on reducing ammonia emissions from urea fertilisers.  The consultation, which closes on 26th January 2021 sets out three policy options which it has identified will lead to reduced emissions from solid urea fertilisers:

  • A ban on solid urea fertilisers
  • A requirement to stabilise solid urea fertilisers with the addition of a urease inhibitor, to slow the conversion of urea to ammonia
  • Restricting the spreading of solid urea fertilisers so it is only allowable from 15th January to 31st March, when the soils are cold, which reduces the ammonia loss.

Defra’s preferred option is a ban on solid urea fertilisers as this will give the greatest ammonia emission reductions.  Liquid urea fertiliser is not affected.  The full consultation can be found at https://www.gov.uk/government/consultations/reducing-ammonia-emissions-from-urea-fertilisers