Category: Arable

DEFRA has released the results for its final estimates of crop areas for England from 1^st June Survey.  The area of wheat has fallen by 1.9% to just below 1.7 million hectares; this is the third year in a row in which the wheat area has decreased, (although it still accounts for 62% of the total cereal area).  In contrast, the barley area has increased for the third consecutive year, although this is due to a rise in spring barley plantings by 15.9% as the winter barley area fell by 3.9% compared to 2016 levels.  The OSR area has fallen for the fifth year in a row, this year by 3.6% to 523,000 hectares.  A more detailed analysis will be given next month when the full UK results are available.  The statistical release can be found at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/644481/structure-june17-final-eng-14sep17.pdf

The export surplus in the EU has risen slightly over last year; quantity is not a problem.  However, with an ever-increasing Russian harvest estimate, the ‘local’ competition is high and pricing it to sell means sharp discounts to the internal wheat price.  Consequently, exports from the EU have had a very slow start this year.  It will eventually be exported or consumed internally, but to do either of those, prices will have to fall.  Russian feed wheat is $10 per tonne lower shipped into Egypt and that is why the Egyptians bought a considerable consignment from Russia this month.  Ports on the northern coast of the Black Sea, where much Russian grain is shipped from each year freeze over in cold winters, effectively locking their grain away until spring. This would give the EU a winter opportunity to play ‘catch-up’.

The UK grain harvest is nearing completion, with only small parcels left in the northern parts of Scotland. The quality of the wheat harvest was not great compared with recent years, but with twice as much Group 1 milling wheat grown compared with only 4 years ago, there will be ample domestic milling wheat available.  Nevertheless, the UK will import more wheat then it exports for the third consecutive year, making the UK a net importer for five out of the last seven years.  Previous to that, imports exceeded exports for only one year in the previous twenty.  The change is down to higher UK consumption, rather than significantly less wheat being grown.  The shift might add a small premium to domestic wheat prices, although we should never lose sight of the fact that the marginal tonne (imported or exported) has the greatest impact on the value of the crop.

The crops still remaining to be harvested in northern Scotland are largely barley being grown for malting.  However, as it stands in the field, being rained on, its quality is starting to fade and chances of it ending up in the feed bin rise. Normally at this time of year, the last few fields are being collected but reports suggest that in some areas, in excess of 20% remains unharvested.

Oilseed rape prices are under continued pressure this month, as Canadian and European oilseed rape crop estimates come in higher than expected.  However, unsuitable weather in South America is hampering the drilling of the forthcoming soybean crop.

Beans tend to be amongst the last combinable crops to be gathered.  The rain in recent weeks, especially further north, has increased the risks of damaged quality, staining and bruchid beetle. The Beetle was a problem even for early harvested beans this year, and so careful testing is critical before selling to higher-risk premium markets.  Many crops will be destined for feed rather than human consumption this year.  Without a premium price, the financial returns are unlikely to look good.

Harvest

Harvest has progressed well with good conditions for most of the time despite short rain breaks.  AHDB reports suggest the winter barley and winter oilseed rape crops are now all-but completed, with estimated national average yields of 7.1 tonnes per hectare and 3.5 tonnes per hectare respectively.  These are both marginally above the national 5-year averages.  For oilseed rape, the oil content is also historically high at 45%.  Spring barley, which at the end of last week (25^th) sat at 40% harvested, also shows good yields, but nitrogens are high and grain merchants are reporting slightly higher screenings for both winter and springs than hoped for.  We might expect lots of feed barley this year.

By 24^th August, the wheat harvest was 68% completed, which is ahead of usual (out of the last 5 years, only 2014 was further forward). However, considering the dry spells ahead of harvest it is remarkable how consistent harvest timings tend to be. Reports suggest winter wheat yield averaging about 8.2 tonnes per hectare (again slightly ahead of the 5-year average of 8.0 tonnes per hectare) with yields good in the south and not so good further north.  Recent rain has frustrated farmers with ripe crops in the field, and lodging risks rising. There are some reports of lodged oats, possibly as much as 15% in some regions.

Bean yields have been impressive, and, although the beans often look clean and hole-less, many have ripened with the Bruchid Beetle still inside the bean, and unable to eat its way out.  There are high levels of Bruchid Beetle this year suggesting lots of beans in the feed bin and less for human consumption and therefore export to higher value markets.  Protect those of highest quality.

Much of the autumn oilseed rape drilling has been done, with some already appearing through the soil in the East Midlands and presumably further south.  For those away from the Flea Beetle regions, this year’s high yield and current strong prices could encourage a higher planted area than last year.

Other Market Factors

Grain exports from the EU are very slow this year, with global grain prices continuing to bounce along contract lows.  With record crops being harvested in Russia export competition is strong from the Black Sea region.  Conditions are about ideal in the US, for maize growing and wheat harvesting, again meaning there is minimal yield loss, further depressing prices.  The International Grains Council has thus increased their wheat production forecast by 10 million tonnes from last month.  As prices have fallen, consumption is considered likely to rise (albeit less than the rise of production) and the amount held by the major exporters is also seen rising 4 million tonnes.  A reminder as well that, whilst headline stocks suggest global wheat is at a very high level, over half of this is now held by China, a country that holds no reputation for trading large quantities.  Indeed, buying or selling grains is something it tries hard not to do.

The chart below shows how grain prices around the world (in their own currencies) have slipped steadily since the start of the harvest period, leaving the UK grain (wheat) price in a relatively strong (if precarious) position.  The Pound has taken another step down in strength this week (see article above) adding value to grain and other commodities.

The EU has plentiful supply of barley, so it appears.  Much is of high enough quality for malting so demand for UK tonnages might be lower than usual. This might compound the amount that goes for feed in the UK.

DEFRA has released its provisional arable crop area results from the 2017 June Survey of Agriculture and Horticulture.  These only relate to England, but tend to confirm the trends seen in the AHDB survey results for Great Britain reported on last month; an increase in the spring barley and oat area, but a decline in wheat, winter barley and OSR. There are some interesting differences however.

The results for the wheat area are pretty similar, DEFRA is suggesting the English area has declined by 2.5%. The AHDB figures showed a 3% fall for the whole GB.  The DEFRA figures show the winter barley area has declined by 4% to 361,000 Ha, whilst the AHDB figure was just a 1% drop.  DEFRA is also suggesting another big increase in the spring barley area, up by 15% to 478,000 Ha, AHDB ‘only’ saw a 9% rise.  This is mirrored by the results for oats, according to DEFRA the oat area has increased by 17% to 120,000 Ha, whilst the AHDB survey suggested 7%.

The drop in the oilseed rape area in England was not quite as big according to the latest figures from DEFRA – winter OSR plantings declined by 3.8% (AHDB survey suggested 5% for GB).  Similar to the AHDB results, the East Midlands and Eastern areas saw the biggest drop in OSR plantings: between them they account for almost 48% of the total area, meaning declines in these areas of England are significant.  The Eastern region saw plantings drop by 10.9% in 2017 (14,000 Ha for the region).  Spring OSR plantings only make up 2% of the total oilseed rape area at 8,000 Ha.

The area of uncropped arable land in England has fallen this year by 11% after two years of large increases (21% and 23%).  The figures are the first results and are subject to amendments. The final results will be published on 14^th September 2017.  The full figures can be found at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/638223/structure-jun2017provcrops-eng-17aug17.pdf

Combines are now rolling in many parts of the country, although progress has been restricted by bands of rain in the last week or so.  Early reports suggest that the winter barley harvest has yielded close to average, or even a little above normal on some farms.  Crops on heavier land have, unsurprisingly, dealt with the spring dry spell better than others.  Data is at present limited, but it seems that quality of the early-harvested crops is reasonable too.

For oilseed rape the story is similar.  Yields seem better than the disappointing levels generally seen last year.  They are at around the five-year average or higher.  It is reported that there is a large range in results.  Whilst some crops have yielded very strongly, those that did not establish well, or were subject to strong pest and disease pressure, are coming in at very low levels.   A few wheat crops have been cut in the south, but it is too early to state what the overall crop results are likely to be.  There is some confidence of decent yields though.

In terms of prices, the continued weakness of the Pound, currently at 89p to the Euro, has helped buoy most crop prices through July.  At a global level there is concern about the North America crop, especially spring wheat, due to drought conditions.  Plantings were lower anyway and, with yields being hit, it seems likely the US will produce its lowest spring wheat crop in 15 years.  The same effect is seen in Canada.  These crops tend top be the high-quality milling wheats.  This should be good news for the UK where, thanks to shifts in the varieties being planted, we will have a surplus of milling wheat from this harvest.  However, because of quality differences, our grain cannot always replace the N. American grades.  Also, it appears the French will be producing large quantities of milling wheat this year as quality and quantity bounce-back from the rain-affected 2016 year.  All this means that milling premiums are likely to be under some pressure after this harvest.  At current UK prices, even with the weak Pound, domestic wheat is too expensive for export.

Feed barley prices are at historically high discounts to wheat, but the gap could close in the next few months.  The Spanish harvest has been hit by drought and this may open up opportunities for barley exports.  Malting prices have weakened a little as it appears that continental crops should provide decent yields and quality this season.  The oilseed market has been volatile with little clear direction as traders try to digest various weather and crop reports from North and South America.

The saga of the reauthorisation of glyphosate continues.  EU Member States have held technical discussions on the plans to approve the active substance of a further 10 years (rather than the normal 15 years).   Further discussions are set for the autumn ahead of a vote before the end of the year when the current licence expires.  The EU Commission has clearly stated that it will be down to Member States to make the final decision.  In the past, there has been a tendency for countries to abstain from tricky political votes whereby the decision reverts to the Commission to make.  It has stated that it will not re-authorise glyphosate unless there is the support of a qualified majority of Member States.