Category: Arable

Sugar Contract 2024

British Sugar has announced that the minimum beet price for 2024 will be £37.50 per tonne.  However, this is not an agreed figure with the NFU under the IPA, as negotiations have failed to produce a price so far.  British Sugar (BS) is likely to be keen to get a price out into the sector ahead of autumn plantings.

The price compares with £40 per tonne for last season.  BS argues that production costs have fallen as has the price of alternative crops such as cereals or oilseed rape.  The NFU has pointed to the current strength of the sugar market and the fact that many costs are still elevated.

BS has stated that it will offer a ‘market-linked bonus’ for the 2024 crop.  This would take the price of beet above £40 per tonne if the sugar market remains at current levels.  The yield protection option and contracting part of production under a futures-linked price will also be continued from the 2023 contract.

BS and the NFU are continuing to negotiate.

Oats Herbicides

Oats growers may find their armoury to control grassweeds diminshed this season.  Previously, an Extension of Authorisation for Minor Use (EAMU) was available on the crop for diflufenican.  This includes both the straight product (such as Hurricane) and mixes – (e.g. diflufenican + flufenacet, such as Liberator).  However, the threshold for what counts as a ‘minor’ crop is set at 50,000 hectares.  The UK oat area is far in excess of this.  The HSE is now removing EAMUs for ‘major’ crops.  The sector is looking at options including getting an on-label approval for oats, but this may take some time.

Parallel Spray Imports

The Government has pledged to address the loss of parallel spray imports.  As we wrote back in April (see https://abcbooks.co.uk/spray-import-ban/) the HSE has banned the import of equivalent Plant Protection Products (PPP) as from the end of June, as the EU is no longer supplying data to assess whether they are the same products as approved in the UK.  Farming Minister Mark Spencer and Defra secretary Therese Coffey have now written to the NFU stating that they are ‘committed to addressing’ the issue.  There is also an associated problem with seed imported into the UK from the EU, which has been treated.  This especially affects maize and some root crops.  It seems there may be a temporary extension of the approaval for these imports put in place this autumn.  Defra will then look at options for a more long-term solution.

 

Grain Markets

Global Position

With results from the Northern Hemisphere harvest now coming available, forecasts of global grain supply and demand are being firmed-up.  The latest figures from the International Grains Council (IGC) are presented in the table below.  For the current 2023/24 marketing year (2023 harvest) the latest forecasts are shown, alongside the pre-harvest ones from May.

It can be seen that wheat production is forecast to be lower than last season, whilst usage is higher.  This has sharply reduced end-of-year stocks and pushed up the stocks-to-use ration.  All things being equal, this tight supply and demand situation should be pushing up global prices.  However, a glance at the maize figures show there is forecast to be a large crop this year, with big stocks being held in the major exporters.  Large maize crops are expected from the EU, US and S. America.  This ample supply of the world’s main feed grain is putting downwards pressure on all feed grains – including wheat and barley.  This has impacted UK prices (see below).  However, the ‘wheat’ category contains a variety of grades and qualities.  Tight global wheat supplies means that high-quality milling wheats are also in short supply.  This has pushed up the premium for milling grades over feed.

The soya market drives the whole vegetable oil complex, including oilseed rape.  (It will also be important for animal feed prices through this winter too.)   The production and end-stock forecasts have been cut since the pre-harvest estimates.  This has given some support to oilseeds prices through the summer.  However, production levels are high historically and the market looks to be well supplied.  This will keep pressure on oilseed prices.

Domestic Situation

Harvest 2023 is now all but complete in the UK – apart from some areas in the far north.  Overall yields are probably not far off average – probably a little down and quite variable between regions and even farms.  Quality, generally, is not great – although, again, very variable.  This has meant the high  premiums for milling wheat and malting barley have been maintained.

UK feed wheat and barley prices actually firmed a little during the last month (see Key Farm Facts).  This is, to a large extent, currency related.  The fact that UK Base Rates may not go as high as once feared led to a weakening of the Pound.  This has helped increase grain prices, albeit fairly marginally.  Another factor is likely to be slow farmer selling as they concentrate on the tail-end of harvest and autumn cultivations.

The UK looks set to have large volumes of feed grain.  The demand for this could be lacklustre during the 2023/24 season.  Pig and poultry herds/flocks are lower than historically and do not seem likely to rebuild quickly.  Conserved forage in the dairy sector is reported to be of decent quality and quantity – reducing the need for concentrates.  Therefore, a strong export campaign looks needed to help clear domestic markets.  This has got off to a slow start with very little grain being shipped, or even deals being done so far.  UK grain is currently over-priced against alternatives.   This suggests that UK prices may well come under pressure in the months ahead unless the world market provides some unexpected support.

Grain Market Update

The August USDA World Supply and Demand Estimates forecast a slight drop in production relative to the July report.  This is driven by a reduced outlook for Canadian and European wheat production.  Additionally, US maize production forecasts were reduced slightly with lower yields expected, following results from a producer survey.  The sentiment for reducing supply and demand forecasts (month-on-month) is echoed by the International Grains Council who cut both production and stock forecasts for total grains.

Although estimates have been reduced, this years global harvest is forecast to be considerably larger than last years, putting downwards pressure on prices.  As harvests continue across the Northern Hemisphere, and better yield information becomes available, wheat prices have continued to fall.  Suggestions of large crops in Russia, and the ease of shipping costs compared to the same time last year has moved spot feed wheat prices lower after the late July spike.

In the UK, the changeable weather continues to result in a challenging, stop-start harvest, although progress improved at the end of August.  In the South and East, many businesses have now finished harvest for another year.  Reports suggest that both yield and quality are down on last year, with lower proteins and hagbergs a potential challenge for the milling supply chain.  Malting barley nitrogens are low, a positive; but bushel weights are also low.

In August, UK feed wheat values average just over £174 per tonne, down £4 per tonne on the July average.  Milling wheat values have also moved lower, down nearly £5 per tonne on the July average, at £237 per tonne.  There is still a considerable premium of milling wheat over feed (£62 per tonne) which will be supported if quality issues turn out to be correct..

The discount of feed barley to feed wheat has narrowed over the past month.  Reduced availability of the crop has pushed the discount to £22 per tonne on average across August, compared with £28 per tonne in July.  In the last week of August the discount was as narrow as £17 per tonne.

The supply and demand for oilseeds has also eroded prices this month.  There is larger availability of oilseed rape in Europe this season, with expectations of significant carryover into the 2024/25 season. The oilseed rape price averaged £349 per tonne in August, down from £362 per tonne in July.

The value of pulse crops has taken the biggest hit over the last month.   The price of feed beans and feed peas fell by £37 and £41 per tonne, respectively, mont-on-month.  With harvest underway greater availability.  Early reports suggested that quality has been variable.

Global Grains

Grain markets have been increasingly volatile in July, driven once again by the Black Sea.  US maize crop conditions have improved, but weather concerns still linger.

Ukraine/ Russia

The renewal, or lack thereof, of the Black Sea Grain Initiative (BSGI) has been a key watchpoint for grain markets for the past year.  The agreement, guaranteeing the transit of agricultural commodities, broke down on 17th July 2023.  The ending of the BSGI, came with missile strikes at the port of Odessa, and threats of military action against vessels delivering cargos to Ukraine.

In response to the ending of the BSGI, and subsequent concerns about global grain availability, UK feed wheat futures have been more volatile.  Between 17th July and 19th July UK feed wheat futures (November 2023), gained more than £16 per tonne, before falling back by £5 per tonne.

The lack of the BSGI and exports through a key port such as Odessa is undoubtedly a challenge to global grain availability.  However, reports from key commentators highlight the important role of the Danube and exports via Constanta, Romania, have played, and will continue to play, in keeping grain moving.  An increase in Ukrainian grain being exported by road, rail and waterways through Eastern Europe could cause downwards pressure on grain prices in the countries bordering Ukraine.  Some Governments have already placed restrictions on trade – for example grain can only transit through their territories.

The movement of Black Sea grain will continue to be a focal point.  Further attacks on the Danube port of Reni lifted prices on Monday 24th July.

United States

Following last month’s update, the US Corn Belt has received much-needed rain.  Drought as the crop moved towards silking negatively impacted crop conditions and was a risk to yield prospects.

Yield forecasts have been lowered but remain at record levels due to high planted areas.  While weather remains a risk to the crop, the global supply and demand balance is little changed.  In July, the USDA increased the area of maize it expects to be harvested by 900 thousand hectares.

The increase in the area of maize comes at the expense of soyabeans, with the area expected to be harvested falling by 1.6 million hectares.  The cut to the soyabean area has added significant support to the wider vegetable oil complex, including rapeseed.

Hotter weather and less rain is forecast in the Corn Belt through the first week of August so conditions remain uncertain.

Global Supply and Demand

The latest global supply and demand figures highlight the continued view from the USDA that the world will be better supplied with grain this coming season.  But there is a diverging picture between maize and wheat.  Global maize stocks are forecast to grow by 17.8 million tonnes year-on-year. Meanwhile, wheat ending stocks are forecast to fall by 2.8 million tonnes; to the lowest level since 2015/16. Wheat production was estimated to decline further in July’s USDA World Agricultural Supply and Demand Estimates, driven by month-on-month declines in Argentina, Canada, and the EU.

UK Grain Markets

The barley harvest is underway in England, although progress has been stop-start due to regular rain.  According to the Environment Agency, in the month to 18th July, England had received 111% of the long-term average rainfall for July.  As well as increased lodging in barley and OSR, the higher rainfall will be causing some concerns around grain quality.

With large ending stocks from the 2022/23 season anticipated, and the UK not currently export competitive, the price of feed barley has continued to fall.  So far in July (to 21st July) feed barley has averaged £146 per tonne, down £10 per tonne on the June average.  Initial assessments of malting crop quality have seen lower retentions (percentage of sample retained when passing over a 2.5mm sieve – minimum typically 85-90%) .  This has reportedly led some maltsters to lower intake standards for the current crop.

Feed wheat prices have increased latterly, due to the ending of the Black Sea Grain Initiative.  Ex-farm feed wheat (nearby) was quoted at £180 per tonne, on 21st July.  Milling wheat was worth £243 per tonne.

Oilseed rape values have also increased, with Paris rapeseed futures briefly exceeding €500 per tonne for the first time since March.  Ex-farm oilseed rape was quoted, on 21st July; at £385 per tonne, up from an average of £330 per tonne in June.  Price increases have been driven by the tightening of soyabean markets, and concerns over availability of Ukrainian oilseeds.

Pulse markets were also stronger in July.  Human consumption demand has remained somewhat limited, with difficulties in accessing North African markets.  However, some feed compounders have reportedly included pulses in rations, with global protein values increasing.  Feed beans and feed peas have average £259 per tonne in July.

Glyphosate Review

A review by the European Food Safety Authority (EFSA) into the crucial herbicide glyphosate has found ‘no critical areas of concern’.  The active ingredient’s authorisation for use in the EU is due to expire on the 15th December 2023.  This finding should make the re-authorisation of the product more likely – although there is still a lot of politics around the decision.  Since Brexit, Great Britain has operated its own pesticides approval regime, so this decision does not directly affect GB growers.  However, should the EU ever decide to ban glyphosate, then significant pressure would be on our Government to follow suit.  

UK Arable Outlook

As harvest draws nearer, UK wheat prices have increased, supported by concerns for US maize and prolonged dryness in Northern Europe (see preceding article).  In the week ending 23rd June 2023, ex-farm feed wheat was quoted at £175 per tonne; up almost £15 per tonne on the beginning of the month, but still just behind the May average of £176 per tonne.

AHDB Corn Returns data shows a positive carry into new crop prices, with feed wheat for September delivery averaging £196 per tonne in the week ending 22nd June.  Milling wheat continues to command a strong premium of nearly £66 per tonne, with the price quoted at £241 per tonne, ex-farm.

Barley prices have not gained to the same degree as wheat prices, up £8 per tonne on the beginning of June.  Ex-farm barley is quoted at £156 per tonne – demand for old crop feed barley has increased slightly but remains slow.  The UK is currently not competitive into export markets.  This could continue to pressure prices with a large carryout expected from harvest 2022, and barley now ripening and harvest not far away in the South and East.

Oilseed rape values had strengthened through June, reaching £346 per tonne in the middle of the month, before falling again.  Weaker than expected biofuel mandates in the US pressured soyabean oil prices, dragging the wider vegetable oils complex lower.  Subsequently, ex-farm oilseed rape was quoted at £326 per tonne on 23rd June.

Pulse prices picked up during the month with some renewed demand, but selling reportedly remained limited.  Both feed beans and feed peas were quoted at £241 per tonne, on 23rd June.

Global Grain Markets

Global factors have been key for grain pricing in June, with wheat moving up, largely supported by maize.

Maize has been the significant driver of global grain prices, with drought conditions seemingly worsening through to 20th June.  A USDA report of that date showed 67% of the US maize crop to be in moderate to extreme drought.  Some parts of the ‘Corn Belt’ have now received rain, but much more is needed and at present this is not forthcoming in the forecast.

There is still significant time to go until the crop is harvested.  The crop will begin silking (flowering) soon.  Once silking starts, soil moisture, or lack thereof, will become increasingly important for yields.

At present, the USDA are forecasting a record maize crop for the US (388 million tonnes), based on a trend yield.  Additionally, US maize ending stocks are forecast to grow by more than 20 million tonnes.  With world maize stocks expected to grow by 16 million tonnes, year-on-year, any problems with US production would be supportive of grain prices.  This remains an ongoing watch point.

Another key supportive factor for wheat prices is the situation in Ukraine.  The short-lived rebellion by the Wagner Mercenaries on 24th June led to some increases in wheat price during the day on Monday.  The Black Sea Grain Initiative is also due on 17th July; posturing by all sides in the run up to this date will be a key influencer of price.

The outlook for crops in the EU worsened in June, with the EU Joint Research Centre revising its yield forecasts for all crops lower.  For winter crops, most forecasts remain above the five-year average.  A key driver of the cuts to yield forecasts is the dry conditions being experienced by much of Northern Europe.