Category: Arable

June Survey of Agriculture 2018

Defra has released its provisional estimates from the June 2018 Survey of Agriculture and Horticulture showing planted areas in the UK for the main crops, and also estimates for crop production.  The key results for the arable sector are summarised in the table below.  The data is only provisional at present, final results are expected to be available on 20th December.  Wales does not produce provisional results, so 2017 data has been carried forward (except for cattle numbers) to allow UK figures to be presented.

Provisional results show the wheat area has increased marginally but with yields declining, the overall production has fallen by 5.1% on the year.  The total barley area, after increasing in recent years, has fallen but a closer look at the split between spring and winter reveals the spring crop area has continued to increase, although at a slower rate than last year, whilst the area of winter barley has reduced again.  Producers continue to switch to spring crops to facilitate weed (blackgrass) control and to spread workloads.  In addition, the economics of growing spring malting barley are better than winter feed barley in many cases.  The oat area has continued to increase, but a poor harvest has reduced the provisional yield by 9.2% compared with 2017, resulting in overall production for the year down by 2.1%.

UK JUNE CENSUS AND CROP PRODUCTION
AREA – ‘000 Ha 2015 2016 2017 2018 Change 17-18
WHEAT

Yield (tonnes per Ha)

Production (‘000 tonnes)

 1,832

9.0

16,444

 1,823

7.9

14,467

 1,792

8.3

14,837

 1,797

7.8

14,086

 +0.3%

-5.3%

-5.1%
BARLEY

Winter Barley

Spring Barley

Yield (tonnes per Ha)

Production (‘000 tonnes)

 1,101

442

659

6.7

7,370

 1,122

439

683

5.9

6,655

 1,177

423

754

6.1

7,169

 1,157

394

762

5.7

6,606

 -1.7%

-6.7%

+1.1%

-6.3%

-7.9%
OATS

Yield (tonnes per Ha)

Production (‘000 tonnes)

 131

6.1

799

 141

5.8

816

 161

5.4

875

 174

4.9

857

 +7.8%

-9.2%

-2.1%
OTHER CEREALS 35 45 52 51 -1.8%
TOTAL CEREALS

Production (‘000 tonnes)

 3,100

24,734

 3,132

21,967

 3,181

22,999

 3,178

21,742

 +1.6%

-5.5%
OILSEED RAPE

Winter Oilseed Rape

Spring Oilseed Rape

Yield (tonnes per Ha)

Production (‘000 tonnes)

 652

645

7

3.9

2,542

 579

570

9

3.1

1,775

 562

554

9

3.9

2,167

 601

593

8

3.4

2,051

 +6.8%

+7.0%

-6.1%

-11.4%

-5.3%
LINSEED 15 27 26 25 -6.2%
SUGAR BEET 90 86 111 116 +4.5%
POTATOES 129 139 145 142 -2.1%
FIELD BEANS 170 177 193 158 -18.0%
COMBINING PEAS 44 51 40 41 +1.4%
MAIZE 187 194 197 224 +13.3%
FALLOW 214 262 241 269 +11.5%
Source: DEFRA    2018 data is provisional

After recent year-on-year declines, the oilseed rape area rose by 6.8% compared with 2017.  But the difficult weather conditions during the year caused a fall of yields resulting in overall production, provisionally, declining by 5.3%.  The lack of pest and disease control options were a problem in oilseed rape production, with anecdotal evidence that flea beetle has been an issue this current planting season too, in areas not normally as prone.

The new sugar beet contracts offered in 2017 caused a significant increase in planted area, this increased further in 2018 and is getting nearer to its ‘traditional’ area of circa 120,000 Ha.  But a difficult growing year in 2018 and lower prices for 2019 are likely to slow the pace of increase.  The potato area, after recent year-on-year increases has declined and with yield expected to have taken a hit, production will have fallen (see potato article).

The the ban on PPPs on all EFA land for 2018 caused the bean area to decline by 18%.  The full crop area and production figures can be found at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/747210/structure-jun2018prov-UK-11oct18.pdf . The first statistical indications of plantings for next year will come next month with the publication of the AHDB’s ‘Early Bird’ Survey.

Combinable Crop Markets

Wheat Supply and Demand

The news about the domestic marketplace for old crop (newly harvested) wheat is dominated by the announcement of bioethanol manufacturer Vivergo closing down, apparently for good (see accompanying article).  The plant claimed to have taken over 1 million tonnes of domestic feed wheat, largely from the Yorkshire and Humberside area.  The addition of this tonnage to the grain consumption figures will certainly have added considerable value to the local wheat price.  However, with such sporadic operation, with closed periods, partial opening and apparently operating at less-than-full capacity, it might be less noticed than the headline figures suggest.

In addition, for every tonne of wheat supplied to the plant, about a third ended up as animal feed; the adjustment in the animal feed market might also reduce the impact to the combinable crop farmer.  We believe the other large cereals-to-biofuel plant, Ensus, remains operational.

Since the early 1990’s the UK’s consumption of wheat has gradually risen from less than 11 million tonnes per year to a figure heading towards 16 million tonnes per year, a rise of nearly 50% of wheat use.  Consumption continued to rise until it peaked in 2016/2017.  It is possible that this will mark a turn in the overall volume of wheat processed in the UK.  Without a corresponding rise in wheat production, the UK turned from being a net wheat exporter into a net importer.

The chart shows the production and consumption of wheat in the UK over quarter of a century.  The orange line shows production fluctuating within a volatile 12-17mt range, and the blue columns the gradually rising and more predictable consumption figures.  The 2018/2019 production figures assume a 14 million tonne production (based on 7.9 tonnes per hectare and 1.77 million hectares).  The consumption forecast is the rolling 5-year average consumption less an estimated 600,000 tonnes of consumption by Vivergo. Despite this reduction in expected demand in the coming year, it still leaves the UK as a net importer of wheat.

UK Wheat Production and Consumption

Market Outlook

Full specification milling wheat is trading at approximately a £15 per tonne premium, relatively firm, largely on the weakness of the feed market, rather than strength of the milling prices.  Feed demand for both wheat and barley are reported as light, which has resulted in lower prices.  However, the cooling temperatures and recent sharp frosts might send some cattle indoors and curb grass growth, fueling demand, especially for barley, as wheat is primarily fed to non-ruminants that are housed all year.

The malting barley market is comfortable there is ample good quality barley available this year, and probably solely within the contracted tonnage.  Those with uncontracted  tonnages might think carefully about how long they should be kept for; if a reasonable price is bid, it might be prudent to sell to it.

There is a relatively large amount of mediocre oats this year, meaning the price for feed samples is not great (feed barley is trading close to wheat, but poor oats are lower), but those with good quality oat samples are achieving a reasonable milling price.

Bean harvest in the UK has been poor.  Some consider the crop to be down by over a quarter, and some think 40%.  This has its implications regarding supplying ongoing customers and export outlets the UK has cherished, but also, the availability of seed beans is a high concern for seed merchants.  It might just be that one poor harvest could lead to a low drilled area for next year.

There are reports of considerably less oilseed rape being planted this year, and of that which has gone in, a large proportion is either not germinating because the ground has been too dry or has fallen victim to the flea beetle.  Grubbing up and restarting has been common, especially in the Midlands areas.

Internationally, the USDA considers global wheat production is 25 million tonnes lower this year than last, but consumption will be up by 2 million tonnes.  Stocks are expected to fall 13 million tonnes making the global marketplace that bit tighter.  For coarse grains (feed grains), whilst the analysts think the production has increased, so will consumption.  So also leaving a stock drawdown, in this case of almost 40 million tonnes to 185 million tonnes.  This is bullish of course, but much of that information is probably already built into the market prices.

Vivergo Closure Proposed

Vivergo has announced a proposed cessation of production as of the 30th September.  Vivergo is the UK’s largest manufacturer of bioethanol, a biofuel made mostly from domestic (UK-grown) wheat.  Its announcement implies it is a permanent cessation and therefore presumably firm closure, although the wording it not very explicit.

The company blamed the UK Government’s ‘lack of pace to introduce E10 biofuel’, a bend of between 9% and 10% biofuel in petrol.  The regulations currently encourage fuel manufacturers to incorporate 5%  biofuel into their fuels, although Department of Transport data from August 2018 shows total ‘renewable fuel’ accounted for 3% of road fuel in 2017/2018.  Most of this is biodiesel from waste vegetable oils.

The Vivergo website states that the firm uses 1.1 million tonnes of feed wheat per year, but other sources have suggested the plant has seldom operated at full capacity, for example having had a 4-month closure from December 2017 to April this year.  Notwithstanding this, the closure, if permanent, would have a depressing impact on the price of wheat in the Yorkshire/Humberside area.

 

 

Beet Price 2019

The beet price for the 2019 crop will fall to £19.07 per tonne.  This compares to the current price, for the crop just about to be harvested, of £22.50 per tonne.  The fact that the price announcement is later than usual suggests that negotiations between British Sugar and the NFU were (even) more difficult than usual.  The EU sugar price is at very low levels, so the processor was likely pushing hard to reduce the price paid for its raw material.

A number of other points have been agreed;

  • there will be no crown tare reduction for all contracts agreed from 2019 onwards.  It is stated that this raises the price from the headline £19.07 per tonne to the equivalent of £20.42 under the terms of the previous contracts.  Whilst the wording is not clear, but this implies that those who signed-up for under the 3-year contract options available in previous years will still be subject to crown-tare reductions
  • the 2019 contract will be a one-year deal only; no 3-year contracting options will be offered this year
  • for 2019 the ‘threshold’ EU white sugar price where the revenue sharing mechanism starts is reduced from €475 to €375 per tonne (to reflect low market prices).  This could increase the maximum price by £4.50 per tonne should the sugar market improve (at €1 = 85p).
  • any late delivery payments will be based on the highest guaranteed minimum beet price paid during the campaign – presumably the £22.50 per tonne that will be payable to those who took the 3-year option at 2018 prices
  • Contract Tonnage Entitlement (CTE) performance rules will be widened to include planting sufficient area as an alternative to delivering a specified tonnage

Growers should be receiving contract offers from the last week of September.  BS and the NFU have also agreed to work together to develop a pricing model that shares risk and reward more equally between grower and processor.  This will be piloted for the 2020 crop.

Turning to the current crop, British Sugar has announced that it expects a ‘much lower’ harvest than last year’s 1.37m tonnes of sugar.  The 2017 crop delivered an average beet yield of 83.4 tonnes per hectare, but 2018 will not match that due to the late drilling and moisture deficits over the summer.  The harvest campaign will commence on the 26th September with the opening of the Wissington and Bury St Edmunds factories.   

Crop Areas

DEFRA has released the results for its final estimates of crop areas for England from 1stJune 2018 Survey. After three consecutive years of decline, the wheat area has increased marginally (by 1%) to just under 1.7 million hectares.  The OSR area, which had seen reductions for the past five years, has also recorded an increase in 2018; up by 7.6% to 563,000 hectares.  In contrast, the barley area, which had increased for the last three years (particular in the spring barley area) has seen a 2% decline.  This though is mainly due to a fall in the winter barley area, as the spring crop has seen a very marginal increase of 0.1%.  Other notable changes include the 17.9% drop in the field bean area, likely to be due to the ban on PPPs for beans grown to satisfy EFA requirements.

A more detailed analysis will be given next month when the full UK results are available.  The statistical release can be found at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/740136/structure-june18-final-eng-13sep18.pdf

August 2018 Arable Update

The Wheat Market

Wheat price this morning (24th August) is a hefty £15 lower than at its high point of the season on the 8th August.  It is easy for sellers to become disheartened when they realise that they have missed the best prices.  However, only one trade is ever made at the very top of the market, and prices are still very good when looked at with a more long-term perspective.  This morning’s wheat price for nearby delivery has only been seen on 6% of the trading days since 2007; that is equivalent to one day out of three weeks.  Moreover, prior to this August, today’s nearby wheat price had not been achievable at all for over 5 years, so in fact, maybe it is a great price for sellers.  The chart below demonstrates that, since June, prices have risen by £40 per tonne; faster than at any time since the same period in 2010.  There are farmers selling grain forward who have never sold grain at this time of the year before and some selling next year’s harvest, before having drilled it. But probably not enough.

Drought conditions, it transpires, have clearly impacted on crop sizes throughout the EU, Russia, Ukraine and Black Sea countries (for example, Germany is expecting a wheat crop size 23% smaller than last year). There are concerns, largely by Russian grain traders, that the Russian authorities will impose export restrictions to manage domestic supplies; something they have done several times before.  Whilst nothing has been imposed yet, there are rumours of export limits of 30 million tonnes.  This would be 5 million tonnes lower than USDA export projections for the season, and 12 million lower than last year’s traded volume.  Curiously, Russia is likely to have harvested its third largest ever crop this season, but it is still 17 million tonnes less than last year.  This demonstrates how Russia has emerged very rapidly as a global agricultural power-house and the largest wheat exporter of 2017/18 and 2018/19.  Russian wheat production in 2017 of 85 million tonnes was far more than double their 2012 harvest, and exports were three times higher.  This explains why when a Russian official rumours a chance of trade restrictions, the market panics into an opportunity for sellers. Market fundamentals like this are so fickle and unpredictable, the market becomes highly volatile when they are happening, hence the dramatic price fall mentioned in the first sentence. The world is £15 per tonne happier about the availability of the 2019 harvest, than the current crop, in other words prices for next year are £15 per tonne lower at the moment.

Partly on the back of high feed prices, partly as lots of milling wheat varieties were drilled last autumn, and partly as harvest was gathered early, dry, heavy and bold because there was no rain damage this year, there is ample high specification milling wheat.  Milling premiums have collapsed to almost 30-year lows of sub £9 per tonne for full specification as a result.

Wheat Yields

The UK is likely to have harvested a moderate-to-average yielding wheat crop, possibly approaching 8.0 tonnes per hectare, not far from the national average of the last 5 years of 8.2 tonnes per hectare, when field edges and environmental areas etc. are considered.  We expect the UK to be a net importer of wheat yet again in 2018-19, making it the third consecutive year and fifth out of the last 7.   The UK continues to process more wheat each year, and the area planted is gradually falling, largely of course because of grass weed issues as well as marginal economics unless yields are high and costs low.

UK Wheat Supply & Demand

UK wheat export figures were published last week, confirming the 2017/2018 marketing year (2017 harvest) had the second smallest wheat export figure since winter wheat became the dominant crop in the UK over a generation ago.  The other year of such low wheat exports was in 2013, after the dreadful autumn rainfall, preventing many hectares from being drilled.  In 2017, the crop size was much more ‘normal’; it is just that it didn’t get sold and therefore exported.  Many farmers or traders are therefore still sitting on a considerable tonnage of wheat along the lines of 2.1 million tonnes, which is about 800 thousand tonnes more than is necessary for ‘supply chain continuity’ between harvests.  That might well have paid off this year, with domestic feed wheat values now a comfortable £40 per tonne higher than in the spring when the soils were still saturated.

Barley

Barley harvest surprised many people with positive yields and good quality.  Initial concerns from some of high screenings have been unfounded and nitrogen levels are usable for most requirements.  The UK will have a surplus, and so in the light of concerns of a ‘no-deal’ Brexit, some have considered selling all exportable goods this year.

OSR

The requirement for oilseed rape globally looks set to outstrip production this year, providing support for OSR to gain price lifts above that of the entire grains matrix.  However, it should be borne in mind that OSR accounts for only a small minority of vegetable oils output globally.  Most oilseed price fluctuation is based on political statements about breaking or resolving trade disputes, the outcomes of which simply cannot be known.

Autumn Drilling

Concerning autumn drilling for 2019 harvest, it is too early yet to provide hard evidence but we expect a continuation of the rise of spring cropping and possible continued experimentation with cover crops.  For wheat, the chart demonstrates a continued decline of wheat area since 2012, apart from the dreadful weather year of 2012. Whilst we believe this trend will continue long-term, we would also recognise that a ‘regression to the mean’ (small, 1-year increase) is also entirely possible.

Neonicotinoid Phase Out

The use of neonicotinoids as seed treatments will end in the UK on the 19th December this year.  The Chemicals Regulation Division of the Health and Safety Executive has set out the rules for phasing-out the use of imidacloprid, clothianidin and thiamethoxam following the EU’s decision to ban the in-field use of the chemcials.  Products containing the three substances (which will include Redigo Deter for cereals and Poncho Beta for sugar beet) will be allowed to be sold up to 19th September.  Growers will then have until the 19th December to sow the seed treated with such products.

Wheat Genome

Scientists announced on the 16th August that the genome of bread wheat had been fully mapped for the first time.  It may seem somewhat late, given that the human genome was sequenced in 2003.  However, wheat is genetically very complicated, having been formed from the natural hybridisation of at least three different cereals.  Wheat contains over five times the number of genes compared to humans.  The International Wheat Genome Sequencing Consortium (IWGSC) comprised 200 scientists from 73 research institutes in 20 countries.  It published the detail of the genome in the journal Science.  It is hoped that, with a full genetic map of the species, researchers can more easily and quickly breed strains with improved traits.

Farm Saved Seed Rates

The British Society of Plant Breeders (BSPB) has published it royalty rates for farm-saved seed for 2018/19.  This covers autumn 2018 and spring 2019 plantings.  The rates can be found at – http://www.bspb.co.uk/farmsavedseed/combinable-crops-payment-rates-and-eligible-varieties.php

Grain Coops Merger

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.