Category: Arable

Glyphosate

Bayer is to appeal the decision of a US court that the herbicide glyphosate was responsible for a gardener’s cancer.  We reported back in August that a Californian court had awarded £290m to Dewayne Johnson.   The award had already been reduced to ‘only’ £78.5m on appeal.  However, Bayer has now asked a Appellate Court to quash the original verdict.  If this does not happen, it will press for a retrial – stating that the original judge did not allow all relevant evidence to be heard.  In a development that may be helpful to Bayer, the US Environment Protection Agency (EPA) issued a statement on the 30th April affirming that glyphosate ‘is not a carcinogen’ when used in line with label recommendations. 

GM Camelina

Defra has approved a five-year trial of genetically modified camelina.  The work, to be undertaken by Rothamstead Research, is testing the modified crop in field conditions.  It builds on previous work undertaken by the institute which is looking to breed a commercial crop that can produce a replacement for fish-derived omega-3 oils.  A plant-derived source of this important component of diets would reduce pressure on wild fish stocks.  It could be used directly in human diets and also in food for farmed fish (which are currently often fed on caught fish).  The trials will also be looking at other elements of modified camelina such as increased oil content and altered oil composition.

Grain Crop Commentary

Old Crop

Towards the end of the wheat marketing season, the impact of the fundamentals of grain supply and demand change, with some taking on greater impact, others less.  Firstly, the increasing amount of information over the emerging new crop overtakes the dwindling and ageing information about the remaining old crop, increasing the impact from new crop fundamentals.  Secondly, the volume of new crop wheat being traded, which is rising all the time surpasses the declining volumes traded of old crop.  This accelerates when the last old crop futures market expires as is the case now as we enter May (having entered the notice period for physical delivery of the underlying good).  Market fluidity also declines considerably when futures markets are not available.  The technicalities of closing the held contracts becomes a physical issue either having to physically deliver them or close the position.

This year, domestic wheat consumers are buying no more than ‘pipeline stocks’, as they are fully aware of the considerable discount (£16 per tonne) that exists between old crop and new crop, and that the price between the two crops must converge at some point.  On the back of the previous paragraph, they are aware of the forthcoming downside to the grain market; if physical grain will have to come out of the stores to honour the futures contracts already held, then this will prove a bearish factor on a thin and technical market meaning prices are likely to fall from here.  Indeed, the value of wheat has fallen over the month and this will probably continue.  It could well be time for long-holding farmers to sell the remainder of what they have in their barns.

New Crop

Rain in the UK has been gratefully received, but for most parts, its not enough.  However, analysts are reporting good crop conditions throughout the world and large global areas of wheat.  High levels of planted wheat in Canada and the US, and rainfall in the EU has raised crop expectations this month compared with last.  Speculators and funds are holding a considerable short position (i.e. the have sold what they don’t own, expecting the value to fall so they can buy them back cheaper).  It is maybe no surprise that the new crop is considerably lower priced than old crop.

Demand for feed barley has faded since Easter as the warm weather has provided a welcome burst of grass for the livestock farmers.  Coupled with this, many farmers have used Easter to clear their remaining unsold grain, placing downward pressure on feed barley values.  Volumes of export sales are small, and short term, as nobody is clear what tariffs will be charged on sales after Brexit.

Oilseed Rape prices have held up well in the UK this month partly on the back of a weakening Sterling. The underlying market, the US soybean market has fallen sharply, despite reduced forecast crop areas, and expectations of a resolution of the US/Chinese trade dispute that has been taking place in recent months.  Despite the UK OSR crop looking pretty poorly (see other article), globally the oilseed crops are in better fettle.  OSR is not a price setter itself as volumes are comparatively small compared with other vegetable oils such as soy bean oil.

The old crop Pulse market is now effectively over, and thoughts are now on the emerging new crop in the ground.

International Grains Council Figures

The International Grains Council (IGC) has released its first full supply and demand projection for the 2019/2020 year, showing 50 million tonnes more grain production than last year with a 34 million tonne rise in consumption.  Consumption goes up every year as we might expect simply as population rises and each person is consuming more than consumers in previous years.  This means that production should be a record each year, simply to keep pace.  However, this coming year, despite production clearly rising faster than demand, the stock level is thought likely to fall.  This is because the stock level was already falling and simply to keep pace, production would have had to rise further.  This is demonstrated in the table.  The level of year-end stock has fallen from over 30% three years ago to 26% now.  This is what has underwritten improvements in grain prices in the last year.  China is ever-increasing its holdings of grain stocks, with over half of wheat and possibly as much as 65% of global maize grains being held in its stores.  This potentially means there is much less grain available than these figures suggest as Chinese stocks are not generally available for the wider market.

All Wheat and Coarse Grain (Million Tonnes)

2016/17

 2017/18 2018/19

2019/20
Production

2187

 2142 2125

2175
Consumption

2126

 2153 2170

2204
Carry over

659

 648 604

575
Stock as % of Demand

31%

 30% 28%

26%

For wheat specifically, the picture is reversed.  The stock level is seen rising, with a greater rise of wheat production for harvest 2019, resulting in production remaining well ahead of consumption.  In terms of physical tonnes, there was more wheat stock in 2017 but as consumption was lower in those days, the stock level as a percentage of demand was lower.  This is shown in the chart below.

Wheat (Million Tonnes)

2016/17

 2017/18 2018/19

2019/20
Production

757

 763 735

759
Consumption

735

 741 742

752
Carry over

248

 271 264

270
Stock as % of Demand

34%

 37% 36%

36%

Overall, the figures suggest a strong level of support for grains overall, but there is ample wheat, suggesting the price premium that wheat tends to carry over maize and other feed grains, might be rather slim for a year.

Cabbage Stem Flea Beetle

Many will have noticed there are considerably fewer bright yellow fields than last year, and some a much paler shade of yellow than their owners will have wanted.  Evidence suggests that in the UK a slightly lower amount of oilseed rape was planted last autumn than previous the year.  A considerable proportion did not have a good start, possibly in part as a result of the very dry soil conditions at the time, but also the concerns of Cabbage Stem Flea Beetle (CSFB).  This a meant an unknown quantity, but perhaps 8% of the national crop, written off before winter.

That which made it to the spring, is also in rather poor condition now, with another 5-10% being written off largely in the central and Western parts of England.  This will either be replaced with another crop or fallowed, or in some cases, left in poor condition, its owner resigned to the fact it will probably generate a poor yield.  It is concerning that reports are emerging that CSFB is having a damaging effect on the emerging sugar-beet crop too.  It is too early to speculate on yield impact, but we will continue to monitor this situation.

Ironically, reports from Lincolnshire suggest some bee-keepers are concerned there is insufficient OSR to supply enough nectar to produce honey from their hives.  Perhaps the loss of Neonicotinoids has had adverse impacts even on the insects that the ban was designed to protect.

What the impact of CSFB on OSR in the British farmer’s rotation in future might be is unclear, but many growers and agronomists have suggested their rotations and crop recommendations will not include OSR for at least three years.  The OSR area is in long-term decline; its area topped out in 2012 and has fallen every year since then apart from once.  In 2019 we could harvest the lowest rape area since 2004, and possibly the smallest crop since then too.

Chlorothalonil

Another important agro-chemical will be lost to EU farmers as the European Commission has voted to ban chlorothalonil.  The fungicide, which is the active ingredient in Syngenta’s Bravo, is an essential tool for controlling diseases in arable crops including septoria in wheat and ramularia in barley.  The proposal by the European Commission not to renew the use of the fungicide was endorsed by Member States of the EU’s Standing Committee on Plants, Animals, Food and Feed (SCoPAFF) on 22nd March.  The proposal was based on EFSA’s assessment, which concluded that the approval criteria was not satisfied for ‘a wide range of reasons’, including serious concerns over high risks to fish and amphibians and contamination of groundwater by metabolites of the substance.  The ban is being described as a ‘severe blow to the industry’.  Chlorothalonil also plays an important role in keeping resistance development under control.  There has been no information regarding use-by or phase out dates as yet.

Horticultural Labour

Defra has published results from a new survey into the demand for horticultural workers.  Currently classed as ‘experimental’, the data comes from a voluntary online quarterly survey that asks horticultural businesses in England what their demand for temporary workers is, and what they have actually secured.  The gathering of this information have obviously been prompted by Brexit and the increased difficulty in securing temporary farm staff over the last couple of years.  For the 2018 year, the demand for seasonal labour unsurprising peaked in the summer months.  The average shortfall (for those who reported a lack of staff) ranged from 4% to 12% over the year.  Details can be found at – https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/785863/Labour_in_Horticulture_Quarterly_Survey_2018_Final_14mar19.pdf

Glyphosate Ruling

There has been a further ruling against the herbicide Glyphosate in the US legal system.  A Federal jury in California found that Monsanto’s Roundup was a ‘substantial factor’ in causing the cancer of Edwin Hademan.  We reported last August that a Californian state court had awarded almost $290m in damages to Dewayne Johnson after finding Roundup caused his terminal cancer.  The latest ruling, coming in a Federal court, carries greater weight and may set a precedent for up to 9,000 similar lawsuits lodged in the US.  However, this is only the first stage of a two-stage trial and Bayer, who now own Monsanto, have stated that they expect to see the ruling overturned.

UK Arable Viewpoint

There have been some healthy volumes of wheat export sales from the EU in March, especially from France to third countries, helping to clear out the overall EU surplus.  Whilst it might seem that France is a competitor to the UK and so French business is not good for UK sales, it is still the same Single Market that volume is being taken from, reducing any surplus and a rising tide lifts all boats in the same harbour; at least for now.

The increase in wheat area in the UK this coming year will be the first rise for five years, and, even then, primarily because 2013 was fraught with drilling problems leading to a very low drilled area.  The prospect of a large 2019 harvest is contributing the sharp decline in grain (wheat values) for new crop in the UK just now.  It is also possible that the market has started making an adjustment to partially build-in the cost of tariffs for new crop exports, should we leave the EU without a deal.  The UK has a feed wheat surplus most years, the majority of which has been exported to Iberian customers for decades.  This would be one area where the impact of Brexit would be felt by the farming community relatively quickly.

Old crop feed barley values are still discounted against their calculated feed-value equivalent to wheat, but still higher than new crop in a similar fashion to the wheat prices.  New export business for malting specifications has temporarily slowed whilst traders are unsure of whether or how much tariffs they are likely to have to pay.  It is much easier once they know what to tap into their calculators so they know the relative costs of grains around the world.

Spring drilling conditions have been good to excellent throughout Britain, it’s just that there’s not so much land available to drill as conditions were so good in the autumn, with more land was drilled then as well.  We would assume there will not be much fallow land this year for that reason.  The area of spring wheat has fallen dramatically this year according to anecdotal reports, partly because the favourable drilling conditions last autumn left little space for spring wheat.  Similarly, spring barley area is thought lower than last year too.

The pulse market is just about finished now so anybody with beans still unsold should think about what they plan to do with them.

In Leicestershire’s heavy soils, the damp footprint beneath the boot suggests a good seedbed and ideal growing conditions. However, dig a spade’s depth into the soil and it becomes evident the soil is still rather dry as a result of last year’s drought.  In fact, this winter has also been a relatively dry few months.  The crops survived last year’s drought because of the very wet spring, this year, the soil moisture is far lower than this time last year so crop will rely on reasonable rains this year to reach harvest safely.

Grain Price Spring Volatility

The £16 per tonne difference in price between old crop and new crop wheat will eventually close.  Either old crop prices will fall or new crop prices rise.  There is currently not much happening to suggest a major increase in new crop values (and prices tend to drift downwards on the lack of new market information). But this time of year tends to see grain market volatility increase slightly.  This is for several reasons.

  • Firstly, the limited tonnages of old crop grain at the end of a marketing season have to match up with demand, and any surpluses, or even more so, shortages, could see prices shift considerably.
  • Secondly, the winter crops that have been lying dormant around the world emerge from their hibernation and agronomists get to see how well (or not) the forthcoming crop has coped with the cold.
  • More importantly though, a quarter of the world’s wheat and almost all the maize are only now being planted, meaning that over the course of this month, the total wheat area for the Northern Hemisphere (which accounts for 80% of cereals) will be established.
  • Weather conditions at this time of year affect crop growth considerably.  However the forecasts, particularly concerning large grain-producing regions such as the US Prairies tend to affect the traders more.  One forecast of rain and the markets swing one way, and another forecast for drought and they swing the other.
  • Finally, whilst the International Grains Council started suggesting its global crop area thoughts for 2019 last month, and the US Department of Agriculture posted some thoughts along the same vein, April is the first month that the new crop is analysed in any real depth by global grain analysts.  This alone causes market shifts as market traders look carefully at these reports.

Cereal farmers will have relatively little grain left unsold by now and will be thinking more about the new crop.  It is important to keep a focus on the underlying market fundamentals when marketing grain in the spring rather than respond ‘knee-jerk’ style to daily announcements and short-term movements.