Category: Arable

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.

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.