Three southern-England grain co-operatives are to merge. Hampshire Grain, Ridgeway and Wiltshire Grain will come together under the new name of Trinity Grain. They will operate from three stores at Membury Berkshire; Micheldever Hampshire and Shrewton Wiltshire. Grain marketing will continue to be undertaken by Openfield who previously worked with the three individual businesses.
The safety of the world’s most widely-used weedkiller, glyphosate, has been thrown into the spotlight once again following a case in the USA. A court in California awarded Dewayne Johnson, a former gardener, almost $290m in damages when it found that his cancer had been caused by its products, Roundup and RangerPro. The jury found that Monsanto, the producer of the chemical, knew of the dangers and had failed to warn users. The company is to appeal the decision. The lawsuit is one of 5,000 that have been lodged in the US following the report in 2015 from the International Agency for Research on Cancer (the World Health Organisation’s cancer agency) which found glyphosate to be a ‘probable carcinogen’. However, the European Food Safety Authority (EFSA), the European Chemicals Agency (ECHA), the EU Commission and numerous scientific studies have all found the herbicide to be safe. The share price of Monsanto’s new owner, Bayer, dropped on news of the US court ruling.
The Government is looking at including a higher proportion of biofuel into petrol. The Department for Transport has launched a consultation on how the uptake of ‘E10’ fuel can be improved. E10 contains 10% ethanol (i.e. biofuel). At present, UK petrol is E5 (5% ethanol), so a widespread switch to E10 would increase demand for biofuels, potentially boosting the prospects of the Vivergo and Ensus cereals-to-ethanol plants, and British Sugar’s Wissington operation. However, there are a number of obstacles to overcome including the infrastructure at petrol stations and the fact that older cars can be damaged by fuel with a too-high proportion of ethanol. The consultation can be found at – www.gov.uk/government/consultations/e10-petrol-consumer-protection-and-fuel-pump-labelling
The British potato area has declined by 3% according to latest AHDB estimates. The 2018 crop is put at 119,000 hectares, compared to 122,800 Ha in 2017. This is the third lowest planted area on record (although it must be pointed-out that the two lowest years were 2015 and 2016 – indicating the long-term downwards trend in area). The cold and wet spring, coupled with low prices in 2017, are the main reasons behind the drop. Output is, of course, dependent on yield as well as planted area. The AHDB offers a number of scenarios. Even if the five-year average yield is achieved overall GB production would fall by 6% compared to 2017. Given the long hot, dry spell a below average yield is far more likely. If yields reduced by 10% compared to the average then the crop would be 16% smaller than last year. All this would appear to be good news for prices, even the quantity available to farmers to sell is lower. However, there seems a significant carry-over from the high-yielding 2017 crop which may keep price rises in check in the short term.
The harvest is in its early stages; this year a little earlier than usual. Over the last six weeks, the UK has received minimal or no rain (at least in England) with June receiving only 25% of the normal levels, and July just as parched so far. Consequently, some crops across the country will have been too dry to yield properly. Before that, of course, though March, April, and the first half of May, the UK received 50% more rain than normal, leaving those areas with strong soils and healthy levels of organic matter, with a long-lasting moisture reserve.
Crops were late emerging from winter dormancy or being planted often into cold, wet spring soils and so had a lot of growing up to do in a short amount of time. This alone reduced expectations of harvest yield. But it is possible that those crops on land strong enough to retain some moisture for a while may have done better than expected. It appears that moisture held deep below the soil’s surface has, on may farms, been a lifeline for the survival of this year’s crops, with the sunshine and hot weather providing an opportunity for heavy, high bushel weight crops to develop. It has been mentioned that this is the weather pattern that more continental countries experience every year, the Paris Basin included. Crops on lighter soils though will presumably bring overall yield averages down.
More specifically, oilseed rape, whose harvest is now well under way, needed minimal swathing or spraying in many parts this year. Some crops are dry but not completely mature, with brown seeds. As yet, yields appear to have held up well, albeit maybe not a record season, even after moisture adjustments are accounted for. Farmers should be careful not to harvest oilseed rape too dry as it can incur penalties if moisture levels are below 6%.
To recap, the standard FOSFA contract for oilseed rape is for 9% moisture. You lose 1% of price if moisture goes up to 10% and gain 1% for every 1% the moisture falls down to 6%. Below that point, it becomes difficult for a crusher to extract oils so could be unsellable. Certainly, a penalty such as a blending charge with wetter seed would become payable. It is worth getting the moisture right and if you’re not sure, keep it comfortably above 6%.
The barley harvest too is under way, with moderate to good yields, and excellent quality on the whole, although it is too early to reach big conclusions about national yields. Bushel weights are high, meaning a greater tonnage might fit in the barn than usual. It also means those farmers who take their own grain to a store, should beware of trailer weights; overweight vehicles tend not to be prioritised for tipping, or, if more road travel is required, not allowed back on the road. Some hauliers might end up carrying too heavy a load; it is the driver’s responsibility and could be expensive to them. It will catch some hauliers out.
It is possible that the very first wheat crops are starting to be cut now, but it is too early to make any useful comments about it. More next month.
As the northern hemisphere harvest gets underway, the forecasts for global grain output should become more accurate. The International Grains Council (IGC) released an updated forecast at the start of July which is summarised in the table below.
It can be seen that wheat stocks are expected to decline for the first time in a number of years, falling according to the IGC by 5 million tonnes. Curiously, the US Department of Agriculture (USDA), whose figures were published more recently, have taken 8.5 million tonnes off their equivalent figure this month from last, (largely because of dry conditions) in; Australia (2mt), the EU (4.5mt), China (1m), Ukraine (1m) and Russia (1.5mt). Many analysts from each respective nation made greater reductions than the USDA. Note the USDA and IGC tend to implement gradual changes to avoid over adjusting and having to go ‘back’, so future months are likely to see more reductions. This now leaves global wheat production 6 million tonnes below consumption according to USDA and IGC, a bullish thing. Of the major producers, only the USA saw wheat crop expectations rise in July.
The drop is not as great as that forecast by the IGC when the first predictions for the season were made four months ago in March. This might seem surprising given the weather conditions, but we should remember that it was very early in the season then with much spring wheat still only just drilled (more or less the whole of Russia and Canada for example). Even so, the rest of Europe and even parts of the US have also continued to experience dry conditions through July, so the next set of figures may see output revised down once again, presumably carving an even greater reduction in carry-over stocks .
| World Grain Supply and Demand – source: IGC | |||||
| Marketing Year –
UK harvest – |
15/16 2015 |
16/17
2016 |
17/18
2017 |
18/19 (2018) May July |
|
| m tonnes |
WHEAT |
||||
|
Production |
737 | 752 | 758 | 742 |
737 |
| Usage |
719 |
737 | 738 | 746 |
743 |
|
End Stocks |
226 | 242 | 261 | 258 |
256 |
| Stocks/Use Ratio |
31.4% |
32.8% | 35.4% | 34.6% |
34.5% |
| Stocks: Main Exporters# |
67 |
78 | 81 | 75 |
70 |
| m tonnes |
MAIZE (CORN) |
||||
| Production |
983 |
1,087 | 1,043 | 1,055 |
1,052 |
| Usage |
975 |
1,045 | 1,077 | 1,098 |
1,096 |
| End Stocks |
288 |
330 | 297 | 257 |
253 |
| Stocks/Use Ratio |
29.5% |
31.6% | 27.6% | 23.4% |
23.1% |
| Stocks: Main Exporters* |
56 |
80 | 67 | 53 |
49 |
| m tonnes |
SOYABEANS |
||||
| Production |
315 |
349 | 337 | 356 |
358 |
| Usage |
317 |
334 | 345 | 356 |
358 |
| End Stocks |
32 |
48 | 40 | 40 |
41 |
| Stocks/Use Ratio |
10.1% |
14.4% | 11.6% | 11.2% |
11.5% |
| Stocks: Main Exporters~ |
16 |
23 | 20 | 20 |
22 |
17/18 figures forecast; 18/19 estimates # Argentina, Australia, Canada, EU, Kazakhstan, Russia, Ukraine, US * Argentina, Brazil, Ukraine, US ~ Argentina, Brazil, US
But it is with maize that we see a larger, more dramatic, change to production and stock figures, with a 44 million tonne reduction of stocks. Whist this represents only 4% of total production (and therefore a reduction of total availability of 2.6%), it represents a stock decline of 15%, a level the market would take note of. The IGC and USDA make similar projections for maize; even though their stock levels differ by 100 million tonnes, their change in stocks is comparable, which is probably more important. This potential tightening of markets has helped propel maize prices higher, which, in turn, has lifted other grains as well.
Soya stocks show little year-on-year change, although it should be noted that both production and usage show upwards trends, indicating the continued rise of this crop in global importance. Whilst the market balance may not be altering much, trade flows could be significantly different with soya being one of the key commodities caught in the US-Chinese trade war. This is perhaps why the USDA has a slightly different take on the commodity. They see production estimates rising by 4 million tonnes, not a huge change at this time of year, but the biggest adjustment was their expectation of Chinese bean imports, falling 8 million tonnes from a previous 103 million to 95 million; a bearish factor in the oilseeds and protein complexes.
The AHDB’s 2018 Planting and Variety Survey shows the area of oilseed rape has increased along with that of spring barley and oats compared with 2017. The GB wheat area has seen a further decrease, so has the winter barley area. The table below shows the key results.
Wheat plantings are estimated to have declined by 2% compared to 2017, with the largest reductions seen in the Eastern Region and the South East & London, where black-grass remains real problem. With 2017/18 wheat end of season stocks estimated to be the lowest since 2013/14, yields will have to be above the five-year average for GB wheat supply to increase in 2018/19. With the current hot and dry weather now expected to impact yields, this looks unlikely.
| Planting Survey– source AHDB | ||||
| ‘000 Ha – GB | 2016 Final | 2017 Final | 2018 Estimate | % Change 17-18 |
| Wheat | 1,815 | 1,783 | 1,744 | -2 |
| Winter Barley | 432 | 416 | 385 | -7 |
| Spring Barley | 668 | 740 | 768 | 4 |
| Oats ② | 139 | 154 | 156 | 1 |
| Cereals Total ① | 3,053 | 3,097 | 3,010 | -3 |
| Oilseed Rape ② | 579 | 562 | 608 | 8 |
| Total | 3,632 | 3,659 | 3,618 | -1 |
① excludes ‘other cereals’ such as rye, triticale etc.
② OSR and oats figures for Wales not available yet (4,000 Ha & 5,000 Ha respectively in 2017)
It appears that reduced wheat plantings have been replaced by more oilseed rape in rotations, particularly in the East, as opposed to spring barley which had been sharply increasing in area in the recent years. The oilseed rape area in England and Scotland has seen its first rise since its peak in 2012, when it was 143,000 Ha more than the estimates for 2018. The increase is probably due to the better planting conditions for OSR in 2017 compared to the year earlier.
The spring barley area has increased for the fourth year in a row, with increases mainly in Scotland, the North West and Yorkshire, probably in areas unable to plant winter crops in 2017. The winter barley area has seen a 7% year-on-year decline, leaving the overall barley area unchanged for 2018, but with a greater % of lower yielding spring barley; again it will need above-average yields to maintain production levels. Similar to wheat, this is unlikely, given the weather conditions and the possibility that some crops may even be required for forage and will be whole-cropped. Oats have also seen a small increase across England and Scotland.
The attendance at the 2018 Cereals Event, held at Duxford, Cambs, has been announced at 18,000 by the organisers, Comexposium. This is some 11% lower than those that attended in 2017 when the show was held in Lincolnshire. It is also some 25% down on the 24,000 visitors that were seen in 2016 when the show was last in Cambridgeshire. However, the organisers state that exhibitors were generally pleased with the quality of those attending. Cereals 2019 will be held at Boothby Graffoe, Lincolnshire on the 12th and 13th of June.
France has established a task force to work on plans to phase-out glyphosate. It is the French Government’s intention to end the main uses of the herbicide within three years. The Environment Minister and Agriculture Minister have brought together representatives from agriculture, agri-food, distribution and researchers to assist in the phase-out and have announced there will be a ‘resource centre’ by the end of the year, making existing solutions available to all farmers.
Rain has fallen in Scotland which has helped the late-drilled spring crops there, but for much of England, especially in the East, the dry weather is of growing concern. The dry conditions are now likely to affect cereals yields on the lighter land, despite the very wet spring. Some reports suggest the growing season has been curtailed at both ends, meaning less time for yield development. This is potentially true for all combinable crops including both cereals and oilseeds. Being a relatively small island on the global stage, the impact a lower harvest size would have on price tends to be relatively small, beyond possibly raising the import requirement for some grains. However, this factor is raising old crop prices for barley, but for most crops, sufficient carry-over is already arranged by processors.
After the significant rises in prices through May, markets for wheat for this coming harvest did not change over the month to the 25th June, despite about £6 per tonne volatility. However, the values for 2019 harvest rose by £7.30 per tonne. The spread of values really only took place since the 22nd June as shown in the graph:
As the chart also suggests, the wide price spread is unlikely to remain so large for long suggesting either the 2019 harvest prices will come back down or 2018 values move up. However, it also gives an indication of the markets expectation of tighter stocks in the future than there is today. This coming harvest, a lower global stock level is expected, albeit a small decline; perhaps the expectation for greater declines in the 2019 marketing year is mounting.
Markets elsewhere around the world fell in the month to June 25th; Chicago Soft Red Winter wheat for December 2018 for example slipped by over £15 per tonne. Since early March through to 12th June, a rise in market prices had been occurring on the back of dry conditions throughout Russia and several other wheat-producing countries; each potentially nearing stages where yield might become impacted by lack of water. However, the market falls have been entirely political, with rumours of Mr. Trump’s trade barriers reversing Free Trade and hampering almost all global markets, including agricultural commodities. As is often mentioned, trade wars are seldom helpful. Indeed, the US wheat market lost 8% of its value because of it, explaining the considerable divergence between US and European price movements.
From the opening of the November 2019 contract (Jan 2018) until 19th June, the markets have been gradually moving in the right direction for long-holders (farmers), with prices for 2019 harvest mimicking the nearer ones (just slightly less volatile). The declines in the Russian crop as forecast by the USDA and other teams of economists will continue to support prices. Those who calculate supply and demand tables are suggesting the global wheat stock level is likely to take a reduction this coming year for the first time in five years.
Maize production expectations in the US have been very high this month, with crop ratings at record levels for this time of year with 78% achieving good or excellent condition. The relationship with this measure and crop yields have not been brilliant in the past, but it certainly demonstrates that a drought (which takes a long time to set in and affects very large areas) is unlikely this year.
US soybeans took a greater price hit than wheat as a response to the developments in the global trade war, as such a high proportion of trade is sold from the US to China and tariffs have been imposed on this trade, which will profit the Brazilians and few others. US soybeans almost reached 10-year price lows in June.
The old crop pulse trade is now completed. Traders are reminding growers that this is key time for treating the most common insect pests including black bean aphid and bruchid beetle. Four out of every five downgrades of beans last year were because of the beetle.
