Category: Arable

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?

Potato Update

Growers are harvesting a potato grown under the shadow of Covid-19 and very extreme weather conditions.  The AHDB estimates a British potato area of 119,000 hectares, down 1.0% on last year.  Average yields would deliver a crop of 5.4 million tonnes; slightly more than the flood-impacted crop of last year.

National yields are likely to be average at best.  In the Eastern maincrop area, irrigation was vital to cope with the driest spring on record and hot and dry periods during summer.  More rain in the west and north of the country mean that yields were better in those regions.

Prices have started the season on a weak note with little expectation for better returns later in coming months.  The AHDB free-buy price is below £100 per tonne for the first time since the 2017/18 season.  There is demand for pre-pack material, but chipping potato sales are under pressure because of continued disruption in the fish and chip shop sector.  There will be fewer processing potatoes available this season because of reduced contracts.

Fresh retail potato consumption was up more than a fifth in the 12 weeks to 9 August, according to Kantar figures for the AHDB, with annual sales 8.4% higher as shoppers continued to buy more staples as they worked from home.  Out-of-home sales were given a boost by the Eat Out to Help Out scheme, although the exclusion of takeaways meant fish and chip sales did not benefit.  There will be fears that new Covid-19 restrictions could hit demand for potato products again, although frozen chips do have the benefit of a long freezer-life and being good value.

Potato planting in mainland Europe has increased a little, although that increase is confined to fresh table potatoes, with a cut back in the processing potato area.  Table potato prices are under pressure in most countries and while processing prices are very low (around €30 per tonne free-buy) there are signs of increases later in the season.

As if Covid-19 and the weather were not enough to contend with, this season also sees the banning of storage chemical CIPC and desiccant Diquat.  On top of that, a No-Deal with the EU could mean that the UK is unable to export fresh potatoes to the Union as it does not have third-country phytosanitary status yet.  However, as a net importer of potatoes and potato products, the UK could be less hit by the imposition of tariffs than the EU.

Grain Market Post Harvest Update

The combinable crop harvest is all but finished; the combine harvester has returned to its shelter where it spends over 90% of its time.  The few days of work it does is critical but inevitably hugely expensive.  It is a shame there is not a cheaper way to get crops threshed and off the field.

Wheat prices for 2020 harvest have shot up in August and September, from a recent low of £161 per tonne to today’s high of £182 per tonne (November 2020 Futures position).  Publications from the US Department of Agriculture have been showing an increasing global wheat crop size, bearish for wheat prices, but a larger decrease in maize production.  This is the underlying fundamental affecting the base of all grain prices.  Despite the recent reduction in forecasts, output is still 50 million tonnes higher than last year, so the market will not be struggling to source grain, suggesting that unless the local shortage is the main driver, the price spike could be short lived.

This sort of price has not been seen for feed wheat for a couple of years when it reached £193 per tonne for November on the Futures.  Consider however, that it was only above today’s level for a month and the same could happen again.  Once the feed compounders start switching to feed barley which is trading at a phenomenal £40 per tonne discount, then it will generate a cap in the market.  As far as the calorific content of the grain is concerned, barley calculates at about 9 to 10% less than wheat, meaning its proportional value to wheat at £180 should be about £160 per tonne.

The large discount for barley probably exceeds most predictions, but the wheat-barley spread was always likely to have grown this season, with the large barley crop harvested and small wheat crop.  We have also seen a poor quality barley harvest.  Whilst there will be enough malting barley for making malt for the beleaguered brewers, most of the surplus cannot be shipped as malting, so instead finds its way into the considerable feed barley pile.  Scotland is the odd one out and had a good harvest with ample high quality, low nitrogen malting barley, suitable for the malting sector and for shipping down to England.

Is there more barley than wheat?  Well, no, but the demand for wheat is higher than for barley (pigs and poultry eat mostly wheat), the demand for feed barley is limited (sheep and cattle do not eat so much grains) and our export outlets also better developed.  The UK will be importing considerably more wheat than it exports this season, and that will cause interesting logistical issues as our ports are not so well adapted at importing than exporting grains.

Overall oats appear to have harvested in reasonable condition.  Pulses on the contrary have a high percentage of insect damage.

The last fortnight of dry conditions has facilitated a neat end to what began as a tricky harvest period.  It is currently raining hard outside my window, which is now a comforting sight for many who were thinking a drop of rain will start the drilled seeds growing.

Metaldehyde

Defra has announced the outdoor use of Metaldehyde will be banned in GB from the end of March 2022.  The pesticide, which is used to control slugs on farms and in gardens was the subject of an ban announcement back in 2018.  The then Defra Secretary of State, Michael Gove, announced it would not be licenced for outdoor use from 2020; this was subsequently overturned in the High Court following a challenge by Chiltern Farm Chemicals, in which the Government conceded its decision making process had been flawed.

The most recent decision takes into account advice from the UK Expert Committee on Pesticides (ECP) and the Health and Safety Executive (HSE) about the risks that Metaldehyde poses to birds and mammals.  Farmers and gardeners will have until the end of March 2022 to switch to an alternative to control slugs.  Defra cites the usage of pesticides containing ferric-phosphate providing effective control without carrying the same risks to wildlife, but many in the industry claim pellets containing ferric-phosphate are less effective in controlling slugs.

The banning of Metaldehyde is part of the Government’s commitment to ‘building back greener from Coronavirus’ and a step towards ‘building a cleaner and greener country for the next generation’.

Global Grain Supply and Demand

Markets lifted in mid-August because of rumours of a whopping 700,000 tonne French wheat sale to China.  Rumours were confirmed when a fleet of 12 Panamax vessels (they’re the big ones), were booked.  The curious part of the event is that French wheat was dearer than US or Australian wheat, but the Chinese are playing political games, avoiding those who they feel politically aggrieved with, so ended up with the dearer European grain.  That is a short-term positive for the EU (and Britain), although the increasing levels of global protectionism in not good for anybody.  It threatens markets, consumer choice, economies and of course ultimately, security.

It is at this time of year when the global crop projections start to turn into reality.  Many combinable crop producing regions of the world start harvest before us so, by now, data is emerging on the size of the global crop.   Expectations are declining slightly as can be seen in the International Grains Council figures in the table below, with EU and USA suggesting smaller than previously thought crop tonnages.  Russia seems to be bucking the trend with a large grain crop, with 10% more grains than two years ago.  Most of the increase is wheat.  Opening grain stocks are thought higher than previous years, but by less than previously estimated.

Those grains that are not wheat are coarse grains (feed grains), which is predominantly maize.  This is the largest cereals crop by weight in the world and so is dominant in the pricing matrix.  Its current figures suggest a record crop, reaching potentially 1.16 billion tonnes.  It seems a very bearish fundamental, but is only 2.4% greater than 2 years ago.  This is in fact only slightly more than the 2.2% growth in human population over the same period.  As people are gradually increasing the grain consumption (e.g. by shifting from beef and lamb to pigs and poultry consumption), then this is only just meeting demand. We should expect a record production every year to meet the rising demand.

The chart does not show soybean supply and demand.  The key point is, whilst this is not grown in the UK, it has the dominant influence on UK vegetable proteins and oilseeds, being the largest commodity in both markets.  A small increase in the expected crops in the Southern Hemisphere means more will be available from the New Year which could be bearish on oilseed markets.  This may be offset though, if the Chinese continued their pattern of avoiding the likes of the US, and buying from Brazil (soybean) or the EU (primarily grains) instead.  Yet, we must remember that whatever is not bought from the large buyer, will still be available another day for the rest of the market.

In summary, although the UK harvest is going to be small this year, there is plenty of grain in the rest of the world.  This is likely to limit the scope for domestic price rises.

 

Harvest Progress & Autumn Plantings

Harvest Progress

Normally at this time of year, the lion’s share of harvest is completed.  But with intermittent rain preventing significant progress in many parts and a considerable proportion of crops being spring sown, there is still ample to do.  A roundup of the harvest so fr is set out below.

Rather inevitably, it has been uneven, more so than usual.  In parts of the South and East, where more winter crops were drilled, harvest has progressed the most, indeed some might have all-but finished.  Further into the Midlands, West, North and Scotland, it is only just starting, partly as rain has hampered progress, partly because there is more spring cropping here.  Growers on lighter soils appear to have experienced greater yield reductions, suggesting the spring drought was more damaging to crops than the winter rains were; at least for those that made it through to harvest at all.  It’s an interesting turn of fortune with light-soil farms coming through the autumn drilling challenges well, but overall might have suffered greater yield reductions.

On the whole, many growers have a higher winter wheat yield than they thought likely back in February before the rain stopped, but many fields are patchy.  Most still agree yields will not quite reach the 5-year average.

Oilseed rape has been overwhelmingly poor and most opinions canvassed suggest a national yield of perhaps 2.5t per Ha will be as good as it gets.  The official yield will be affected by how much land farmers decided to re-classify as fallow or was re-drilled in the spring.  Plenty of farms drilled 120% of their farm this year; their failed OSR area eventually harvesting a crop of beans or spring oats.  Oats are looking well nationally, especially springs.  Windy rain might blow some yield from the ripe top heads.  Similarly, beans are looking good overall, especially spring beans.

This is a time for harvesters to consider the order of their harvesting. If multiple crops come ripe at once, not only should they consider the total value of the crop in the field, but the potential lost value from a 1-day delay in the field. For example, if beans and feed wheat are both ready to cut, the wheat might represent greater value per hectare, but the delay in cutting the beans might lose more value from discolouration than a similar delay in the wheat.

Autumn Drilling

So what are growers going to do this Autumn?  Most people are expecting a serious decline of OSR cropped area.  A lower drilled OSR area is very likely, but it is possible that for harvest 2021, the volume of OSR might actually increase.  We estimated a 25% write-off from this year’s OSR crop that did not reach harvest.  If next year, the percentage written off falls to a more typical 7%, then a decline in planted area from our estimate of 495,000 hectares in 2019 to a possible 410,000 this autumn would still leave more harvested winter OSR as the table shows.

Possible 2021 Oilseed Rape Area, ‘000 Ha

Many growers are removing oilseed rape entirely from their cropping.  Simply replacing it with another break crop may not solve the problem.  Other break crops such as pulses are available and offer soil and following-crop benefits too.  However, they might not demonstrate such high potential gross margins and could also become squashed in the rotation, affecting their long-term yields.  Some farmers are increasingly collaborating with nearby dairy or AD farmers to offer wholecrop rye, grass fields, as well as other cereals.  Interestingly, the harsh winter of 2012 led many cereal farmers to grow (spring) oats.  Their positive outcome meant that oat area has been higher than pre-2012 every year apart from one.  A surge in oat area this year too, might see something similar happen – depending on market demand.  Spring barley area has also been on an upwards trend with possibly a million hectares being harvested in the current year.  The gradual rise of spring crops can also be seen by a slow decline in winter cropping including wheat which, until 2008, topped 2 million hectares on a few occasions, and now averages 1.8 million.  Spring crops not only help tackle persistent grass weeds affordably, but are cheaper to grow and spread overheads at crunch times of the year.  Perhaps this year will accelerate this long-standing trend.

Beet Contract 2021

The sugar beet price for the 2021 growing season will be slightly higher than this year’s values.  The base price for next year has been set at £20.30 per tonne, compared with the current £19.60 per tonne.  Both these prices have no crown-tare deduction which, since the 2019 crop, has meant that growers get paid for the entire root of beet they deliver.  From 2021 there will be a new sugar scale which will see farmers paid based directly on the sugar content of their beet.  The NFU and British Sugar claim that, taken with the crown-tare change, this means that growers will get paid on 3.4% more tonnage than under the previous system.  This means that the price is equivalent to around £21 per tonne in ‘old money’.

The market-related bonus will be retained.  This will be triggered when the EU reference price for white sugar is above €375 per tonne, with growers getting 10% of the value above this level.

There will also be a three-year contracting option for the seasons 2021 to 2023.  This will be at a fixed price of £21.18 per tonne.  The market bonus under this contract will be triggered at €400 per tonne with the grower receiving 25% of the excess.

Adding to the pricing options will be a pilot scheme linked to the sugar futures market.  This will be open to 100 growers in the first year who can allocate up to 10% of their contract this mechanism.  Producers will be able to fix a price based on prevailing values on the sugar market.

Also for the first time in 2021, there will be a virus yellows disease compensation fund.  This issue has become more prevalent with the ban of the use of neonicotinoid seed treatments.  Under the scheme, a grower’s losses will start to be compensated if they deliver less than 90% of their contracted tonnage (i.e. the first 10% of lost yield acts as an excess).  This is provided they plant a sufficient area and meet certain conditions.  British Sugar will pay 45% of the value of the shortfall (with the compensation payment capped at a 35% yield loss).

Contract packs and offers should be received by growers at the start of September.