Category: Arable

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

Pick For Britain

Despite widespread publicity through the Pick for Britain campaign, UK residents made up only 11% of the seasonal workforce in the fruit, vegetable and flower sectors this year.  This figure comes from the NFU 2020 Seasonal Worker Survey, completed by 244 horticultural growers who employ over 30,000 temporary staff.  Whilst the caricature is of the ‘workshy’ Brit, in reality many of these jobs are in remote rural areas only offering guaranteed work for three to six months – not always an attractive proposition.  There is thus a tendency for UK residents to leave if they get a ‘better offer’.  The Survey found that first-time UK resident workers stayed for nine and a half weeks on average, compared to just over 14 weeks for first-time non-UK workers and 18 weeks for returnee non-UK workers.  The latter category are the most valuable to growers – as well as staying the longest and so minimising re-recruiting costs, they will also already have the skills and knowledge to be productive from day one, and not require extensive training and supervision.  With the end of the Transition Period on the 31st December, free movement for EU national will cease and the 89% of seasonal workers coming from this source will no longer be an option for growers.  The NFU and other industry bodies are campaigning for a massive increase in the Seasonal Agricultural Workers Scheme (SAWS) from its current 10,000 per annum to 80,000.

Grain Market Update

The UK had a record-breaking cereals harvest in 2019.  No records have been broken this year, perhaps apart from the percentage of oilseed rape written off or the percentage decline in wheat crop from one year to the next!

According to provisional Defra estimates, the total wheat and barley crop was over 18.5 million tonnes – nearly 6 million lower than last year, and all of that decline was because of less wheat (the fall in winter barley was more than compensated for by the rise in spring barley).

The chart shows the main combinable crop areas for the UK for a decade. Under ‘normal’ conditions, crop areas vary slightly from one year to another according to shifting market requirements and other economic influences as well as perhaps a small weather effect.  About once every 7 or 8 years, we see greater shifts in cropping because of inclement weather covering large proportions of the country.  That is not to say we can predict when the next weather event will be of course.

The change in the crop rotation was clearly dramatic, and the amount of resultant crops for marketing is equally unusual.  Whilst farms have a different make-up of the crops they want to sell, the market demands are much the same.  There is a mis-match, which will drive imports and exports to balance supply and demand and is also causing sharp price movements.   Prices for wheat have spiked in recent weeks, having risen by over £20 per tonne for since harvest.  The unusual market also explains why barley has not followed suit as it often does, instead, a price spread over £40 has emerged as evidenced in the graph below.

Demand for malting barley is slim, as Covid restrictions close pubs and bars throughout the country and beyond, reducing their already severely reduced requirement for beer.  The considerable pile of spring barley is finding ample buyers but for feed.  Prices have picked up a little but continue to trade at considerable discounts to wheat in many parts of the world. The new crop price spread is smaller but still £15 to £20 per tonne.  The figure below shows delivered feed wheat and barley prices in UK and illustrates the growing spread between the two crops.

The oilseed rape market for anybody who has any to sell, is thin and, as usual, is led not by OSR, but the soy and palm oil markets.  The lack of OSR in this country has very little impact on prices.  Global vegetable oils are highly susceptible to currency markets and political moves, particularly regarding the relationship between the US and China.  Brexit has little impact on the oilseeds markets as they have no tariffs.  Brexit negotiations affect these markets more because the strength of Sterling changes according to trade deal news.

The pulse trade is small at the moment having become slightly overpriced to other protein markets.  Overall bean quality is not great this year, lowering the overall crop value.

 

Crop Areas and Production

Harvest 2020 was, as expected, poor.  The wet weather in Autumn 2019 affected drilling; there was a large swing to spring plantings, but for some these were affected by a dry spring.  The table below summarises the arable results from the June 2020 Survey of Agriculture and Horticulture, showing planted areas in the UK for main crops, and estimates for crop production.  The data is provisional, with final results expected December 17th.  Wales does not produce provisional results, so 2019 data has been carried forward to allow UK figures to be presented. 

Wheat plantings were down by 22% even after many tried to drill winter seed well into February.  With yields also significantly reduced, production is provisionally reduced to just over 10 million tonnes.  Spring barley was the biggest winner due to the severe autumn and winter weather, with over 1 million hectares planted; up 55% on 2019 levels.  But the dry spring reduced yields, particularly for those with lighter land, meaning although the total barley planted area was 22% higher, total production was just 3.9% more than last year, when yields were high.  Some turned to oats as an alternative break crop to OSR, resulting in a 16% increase in the area but, again, yields were poor, resulting in a 5.5% reduction in production compared to 2019.

Winter oilseed rape continues to struggle with cabbage stem flea beetle, with many in the East and East Midlands experiencing widespread crop failures and the crop which did survive did not yield well.  The result is a 39% year-on-year reduction in production and that was following a poor year in 2019.  Planting conditions appear to have been more favourable for OSR this coming season, but there is anecdotal evidence that many have decided OSR is too risky, especially with costs being front-loaded, and are planning on alternative break crops.  Indeed, our own Loam Farm has switched away from OSR to more spring cropping and oats (see June’s article).

The wet weather and failed OSR fields resulted, unsurprisingly, in an increase in the fallow area and as a last resort, some planted maize, which continues to increase as more goes to AD plants.  But the field bean and combining pea areas have also risen by 38% and 27% respectively.  With these being looked at by some as another alternative to OSR, could we see these areas increase further over the coming year?