Category: Arable

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.

Global Grain Supply & Demand

Global grain and oilseed markets have continued to fall over the past month.  A large driver of the drop in wheat prices was the renewal of the Black Sea Initiative.  The deal was renewed for a further 60 days on 17th May 2023.  The shorter deal length drives greater uncertainty for the global supply chain.  The deal now runs until 18th July 2023.  There were moments during the last 60-day period where an extension seemed less likely; this resulted in temporary price spikes.

The renewal of the Black Sea Grain Initiative comes at a time when forecasts of Russian wheat production have increased, also pressuring prices.  Whilst the Black Sea Grain Initiative is vital to market direction, we also must pay attention to the underlying supply and demand fundamentals.

In May, the USDA released its first estimates of 2023/24 global grain supply and demand.   In contrast to the International Grains Council (IGC) forecasts, the USDA sees a softening of the grain balance, year-on-year, with significant maize stock growth offsetting a fall in wheat stocks.  The IGC’s updated 2023/24 forecasts show a further tightening of the global supply and demand.  The chart shows the USDA figures with production exceeding consumption.  It also translates this into year-end stock figures.  Whilst, on the headline stock figures, the world looks well-supplied with grain, taking China out of the calculation shows the world is in a far tighter position.  China tends to hold its stocks for strategic rather than trading reasons and they don’t really contribute to the availability of grain to the rest of the world.

The US and Global maize crop are an important element of the softening USDA supply and demand picture.  Maize production is expected to increase by 69 million tonnes globally, and stocks by 15 million tonnes.  The US alone is expected to account for 39 million tonnes of the production increase, while seeing its stocks rise by 20 million tonnes.

The US maize crop is currently 81% planted (week ending 21st May).  Crop conditions will need to be watched closely for their impact, either positive or negative, on crop potential and so, price. At present the outlook for maize in the US remains positive.

In Europe there have been contrasting weather conditions.  Conditions have generally been favourable in Northern Europe, albeit with too much rain during spring planting.  However, prolonged drought in Spain is causing concern.  Grain yields in Spain are forecast to be down by 30-40% against the five-year average, by the EU Joint Research Centre.  This may support demand for UK barley exports.

UK Grain Markets

UK cereal and oilseed pricing continues to face pressure from global market conditions.  Ex-farm feed wheat (nearby) was worth £179 per tonne in May.  This is down £9 per tonne on the April average price.  The price of feed wheat has now fallen more than £40 per tonne since January.  Milling wheat continues to hold a strong premium over feed wheat, extending to £70 per tonne on average in May.  Feed barley prices averaged £165 per tonne in May, with the discount to wheat narrowing.

AHDB published its latest UK supply and demand estimates for the 2022/23 season. The estimates highlight the increased ending stocks for both wheat and barley. Large cereal crops from harvest 2022, have been met with weak animal feed demand. The ongoing challenges for the pig and poultry sector resulted in a further cut to wheat demand of 130Kt.

The challenges for animal feed demand will carry into the new season. With large carry-in stocks and crops generally looking healthy, domestic prices will need to remain export competitive.

The value of Oilseed rape has fallen to the lowest point since October 2020, at £345 per tonne ex-farm in May.  Prices have continued to fall throughout the month, reaching £330 per tonne, delivered into Erith, on 24th May.  Oilseed rape prices are being undermined by large EU carry-in stocks for the new season, with the EU expected to harvest its largest OSR crop since 2014 (20 million tonnes).  Wider oilseed market fundamentals are also pressuring OSR prices, with the USDA forecasting a 40 million tonne increase in soyabean production in 2023/24.

Bean and Pea prices have bucked the trend of other combinable crop markets, with both commodities gaining £7 per tonne, month-on-month.  Feed beans were quoted at £228 per tonne and peas £234 per tonne.

Potato Roundup

A reduced area and late planting means a very small 2023 potato crop is expected this year.

Potato growers have probably planted the smallest crop on record this year, with most of that crop going in very late.  The total GB area is forecast to be around 100,000 hectares, which would be 5% less than last year, according to World Potato Markets (WPM) estimates.  Low prices and high costs means that planting of pre-packed potatoes is likely to be the smallest ever at 36,000 hectares; similar to the area for processing potatoes, which growers have favoured more because of higher contract prices – up by 30% in many cases. The area of bagged potatoes for chipping is also down, as is the seed area.

The lack of AHDB area data makes it difficult to give more precise figures, but WPM estimates that there is a total GB area of 101,723 hectares; 13.4% less than in 2020 when the last AHDB data was published.  The pre-pack area is down 18% on 2020 to 36,342 hectares, processing potato area down 8% to 36,019 hectares, fresh chipping area down 15% to 12,005 hectares and the seed area also down 15% to 12 912 hectares.

If there is a repeat of the average 2020 yield of 46.7 tonnes per hectare then production would be 4.750 million tonnes.  However, achieving such yields might be difficult as a wet and cold spring have delayed planting by at least a month – some growers will not finish planting until the first week of June.  The planted crop is now vulnerable to extremes of weather including hot and dry or wet conditions.

The prospect of a late harvest and a relatively small 2023 crop have pushed prices up in recent weeks.  Old crop white potato prices are double what they were earlier in the season at more than £400 per tonne, while some bagged chipping potatoes are making more than £700 per tonne.

Prices in mainland Europe have risen to record levels driven by a lack of supply, late planting and strong demand.  Free-buy processing potatoes are making almost €500 per tonne; double what they were at the start of the season.  Those very high prices are likely to continue into the new season because of pressure on supply.
The lack of potatoes in the UK means that its imports of frozen fries have soared to more than 810,000 tonnes or the equivalent of 1.6 million tonnes of potatoes.  The market is now the second largest in the world after the US.

No Horticulture Strategy

Defra will not, after all, be producing a strategy for horticulture.  Readers may recall that this was one of the pledges in the Government’s Food Strategy last June (see https://abcbooks.co.uk/government-food-strategy/).   The announcement was made by the Farming Minister, Mark Spencer, who stated that the sector operates in a ‘complex, ever-evolving commercial and political landscape’ and that a comprehensive strategy was not appropriate.  Mr Spencer also stated that the appointment of an industry expert to advise Government on controlled environment horticulture, as promised by the previous Defra Secretary, Ranil Jayawardena, would also not go ahead.  This decision has met with a predictably angry response from the horticulture sector, which believes the Government has little interest in the pressures it is under.

Grain Market Update

In February’s Bulletin we highlighted that the fast pace of imports of Ukrainian crops into the EU was pressuring prices.  This came to a head in April with Poland, Hungary, Bulgaria, Romania, and Slovakia announcing bans on the import of Ukrainian agricultural goods.  The EU has proposed measures to guarantee that crops moving into those nations are re-exported and do not remain in those five domestic markets.  In addition, the EU has proposed the provision of €100m to compensate farmers in those nations.  At present there is no agreement on whether this deal will be accepted.  The news of the bans initially supported prices, but they have subsequently fallen.

Further uncertainty for grain markets has been caused by the 60-day terms the Black Sea grain corridor now operates under.  Comments suggesting the G7 would ban exports to Russia, were reacted to by former Russian president Dmitry Medvedev with suggestions of the Corridor agreement being scrapped in retaliation.  This has served to support grain prices in the short-term.  Overall, the situation in the Black Sea remains a dominant driver for grain and oilseed markets.

Looking ahead to the global supply and demand picture for next season (2023/24), the global grain stocks picture was eased slightly in the latest International Grains Council supply and demand figures, owing to greater maize production, particularly in the US.  That said the overall picture remains tighter year-on-year.  With weather concerns in part of the US, particularly for wheat, any adverse weather would support prices.

UK grain prices moved higher following the uncertainty around Black Sea grain movement.  UK feed wheat (ex-farm, nearby) was quoted at £190 per tonne in the week ending 21st April.  This is up around £8 per tonne on the month.  The milling premium also extended slightly, quoted at £61 per tonne.  Feed barley has struggled to find demand in 2023 but has been able to compete into export markets recently.  The feed barley price was quoted at £170 per tonne, on 21st April.

Oilseed rape prices have fallen since the start of the year.  However, concerns around dry weather in Argentina has continued to cut soyabean production forecasts supporting the wider oilseed complex.  Oilseed rape prices have risen by nearly £30 per tonne, month-on-month, to £380 per tonne.  That said, expectations remain for bigger global rapeseed crops in 2023/24.  Also, a bumper Brazilian soyabean harvest is expected which adds pressure vegetable oil markets.  Oilseed rape prices may be supported in the longer term with the EU Parliament backing a ban on imports linked to deforestation, including palm oil and soya. Companies selling into the EU will now have to provide verifiable information that goods were not grown on land which has been deforested after 2020.

Pulse prices have been stable month-on-month, with pea and bean prices unchanged at £226 and £220 per tonne, respectively.

The last month has been a busy one for the majority of arable farmers, the wet conditions of March have led to a backlog of planting and spraying.  While April conditions have not been ideal they have at least allowed field work to continue.

Spray Import Ban

There is concern that UK farmers will soon face higher costs and less choice when it comes to plant protection products (PPP).  The Health and Safety Executive (HSE) has announced that sales of ‘parallel products’ will end from the 30th June this year, with all sprays having to be used by the 30th June 2024.  Parallel products are PPPs that are imported from other EU countries.  Permits for their import have been allowed if they have the same composition as a product authorised for use in the UK and have been approved in their home market.  This has meant that UK prices have, generally, been kept close to those on the Continent, as the parallel import price puts a base in the market.  It has also increased availability, as imports have provided an additional source when product has been in short supply domestically.  The HSE has been using EU data to assess whether products are identical.  Following Brexit this data is no longer available to the UK authorities.