Tag: rain

Harvest 2020 Prospects

In the June 2019 edition of this Bulletin, we wrote “It never rains, it always pours!  By early June, some were concerned about the dry soil conditions, by the end, the concern was flooding.”  Some parts of Central England have felt the same about this year, with flash storms, bringing a month’s rain in a morning, onto previously dry land.  Damage to crops is thought minimal, if only because they are so thin!  The current sunshine will help them ripen with good quality and support bushel weights.

Since September last year, the November 2020 feed wheat futures price has lifted from £140 per tonne to over £175, and is currently at about £163 per tonne.  Since September, production concerns have reduced the expected crop size to what most people now expect to be considerably less than 10 million tonnes, and probably nearer to 9 million.

November 2021 wheat price has hardly moved out of the £150 to £155 per tonne range since September.  Clearly, there is so little information about how much there will be in 2021 yet, and what the change in demand might be, that the market does not move far unless currencies shift it.

Looking ahead at the possible, or likely supply and demand figures for wheat this year, we find a most unusual situation.  We are likely to enter the 2020/21 crop marketing year with considerable carry-over stock level according to the AHDB; higher than we have had for 30 years.  This is convenient, as the harvest projection outlined above is 5 million tonnes, or a third, down on the average crop size.  It means the UK will still need to import approaching 4 million tonnes of wheat with zero exports to balance the books and finish with sufficient ‘pipeline’ stocks – the stocks that are required to keep the mills running between the end of the marketing year (June) and the harvest.  This is an import level also not seen in a generation.  Not only has the UK not had a crop this small in that period, but also, since the last small crop (of 11.5 million tonnes in 2001), the UK has increased its level of wheat processing and consumption by 2 million tonnes.

UK Wheat Balance Sheet – source AHDB & ABC

The barley supply and demand outlook is less extreme.  Whilst the data is not as easy to interpret (two crops, less certainty about spring drilled area for example), using the lowest yields for both crops for a decade, and the crop area figures used by The Andersons Centre, we end up with a crop of 6.3 to 6.4 million tonnes.  This is considerably less than last year (8 million) but similar to 2018.  The rains last week will have provided a necessary boost to the growing crops in the UK, especially the springs, and now most grains will have sufficient moisture to see them to harvest.

The area of oilseed rape harvested is likely to be less than 400,000 hectares (including springs), making it the smallest area since 2002.  With some shocking looking crops in the ground, it is possible the total crop tonnage will be less than it was then.  Demand is lower though, as the economics of biodiesel is not worth turning the factories on, and with people not eating out (where food is generally fattier), the demand for oils for cooking has also fallen.  The market for pulses at this time of year is very quiet.  The recent rains will have been very well received by the growing crops, especially the spring drilled ones.

October Arable Commentary

This time last year, we discussed how well the planted crops had established and were growing.  This year, over much of the UK, there is little to talk about as many farms have done very little drilling at all.  Official data reports that England averaged 107.5 mm rainfall in September.  This reading is far lower than that recorded in some people’s rain gauges; the topic of conversation that has trumped the crop yield discussion in pubs in all arable parts of the country of late.  However, the last time the official September rainfall eclipsed 100mm was in 2000.  That year was even wetter therefore than infamous 2012 year, which, whilst it had been wet on and off since April, and became very wet in October to December, had a dryish September.  Notably, the average September rainfall across all of England is 64mm, just over half of what the country has received this season.  Wales has just had its wettest September since 1981 but Scotland had the driest September in four years this year.  October seems to have been similar.

Drilling therefore is considerably behind schedule, with several people cancelling winter varieties in favour of either fallowing or a determination to drill in the spring.  Others have adopted a wait-and-see approach with late-planted winter wheats still an option.  Any rotation changes driven by the weather will add to existing trends.  This is particularly the case with oilseed rape where the fall in planted area is expected to continue for harvest 2020.  The 2019 crop showed the smallest crop output since 2004, and the smallest planted oilseed rape area since 2002 (at which point there was industrial oilseed rape on set-aside land).

UK wheat prices have also remained uninspiring this month.  Since the UK nearby wheat futures contract slipped below the Chicago wheat price (Soft Red Winter) in June, it has shown no inclination to swap back, instead following a relatively close £15 per tonne premium over Chicago number 2 maize. Number 2 maize is the cheapest, commodity-level maize that is used for animal feed, starch production and other industrial uses, so we would expect our wheat to be worth a bit more than that!

Malting barley prices have risen slightly this month, but looking forward, if this year is going to be anything like other very wet autumns, we could have high areas of spring barley planted, meaning a thumping big pile of malting barley so very small premiums next harvest.  Growers should consider their marketing options such as minimum prices, contracts and so on.

Whenever Sterling has risen in the month, we have seen pulse prices soften as would be expected.  It continues to remind us that the marginal tonne of a commodity is the one that sets the local prices.  We have had three years of higher grain prices because of a weak currency, but if we see a Brexit Deal happen this might change back.