July Arable Update

Harvest Prospects

The harvest has begun in southern and central parts of England.  We are not yet going to be drawn on our opinion so far.  Such early reports are of almost no value and are often wrong.  However, the recent spell of warm (mostly) dry weather will have helped the crop to mature.  We assume the harvesters are all serviced and ready to go, the grain barns are clean and hygienic, harvest staff arrangements sorted and so on.  Also make sure your farmers have the up to date farm assurance stickers, it saves time and cost if they are ready now.  Have you thought about booking your autumn seed yet?  It’s time to plan the next rotation.

Whilst the rain in July has been heavy in short bursts, June was dry for most. Indeed, comparing last year with this provides a stark comparison. These two maps show the rainfall as a percentage of average for last June and this. In each year, the colours reach the most extreme rainfall band, but in opposite directions:

JUNE RAINFALL: 2012 AND 2013 – Source: Met Office

Note: for those reading the printed Bulletin these maps (and many others) can be accessed via –http://www.metoffice.gov.uk/climate/uk/summaries/anomacts

UK Trade and Stocks

The chart below demonstrates the sharp change in wheat trading that the UK has experienced for the 2012 harvest.  There has been a substantial drop in exports; to below that of where imports have been for the past two seasons.  Conversely imports of wheat have shot up.  The grain marketing year as measured by DEFRA and other EU Member States, ended on the 30^th June, meaning the new season has already begun.  This seems peculiar for us, but in order to capture new crop trade from the Mediterranean, the dates are slightly earlier than would be ideal for the UK.  The final month of figures is as yet unavailable, but it appears from the May data and comments from the traders, that exports picked up slightly in the dying weeks of the campaign, but then, so did the imports.   Indeed it appears that there is plenty of grain remaining in the UK either on farm or in processors’ stores.  Nobody is scrabbling about trying to get short term cover. This partially explains why the price of grains has fallen sharply in July

 UK WHEAT TRADE FIGURES (TO MAY) – Source: Revenue and Customs

Prices

The price matrix of all combinable crops is always changing.  In 2011/12 the oilseeds prices rose by a greater proportion than the others.  In 2012/13, the pulse prices rose proportionately faster, generating higher returns for those with good quality samples.  This price advantage for pulses seems to be slipping back slightly now.  This is largely based on the expectation of high tonnages of soybeans from the US this year.

Turning to wheat, the ex-farm price of wheat has not closely reflected the Futures contract prices this year even for people with grain meeting the futures specification (71.5 bushel weight).  However, the futures chart does give an indication of how the market has moved.  From its peak to its trough, the market since last harvest has fallen by a third (a fall of in excess of £70 per tonne). (Although, we wonder how many people did actually sell significant tonnages at above £210 per tonne.)  This fall in market price demonstrates how here in the UK, with such a minor contribution to not only the global production of grain but also trade, we have minimal influence on grain prices, even our own.  Prices have fallen since December as evidence suggesting a large global new crop has increased.

 LIFFE WHEAT (NEARBY PRICE) – Source: HGCA

The bulls have spotted the rumours of the Chinese buying large tonnages of wheat (8.5 to 10 million tonnes) which would make it the largest wheat importer of the year (above Brazil).  It would also be the largest purchases from China since 1995, when its 15 year run of considerable imports was coming to an end.  The bears, though, will draw attention to the good-looking crops with respectable yields (30% better than last year) in the Black Sea region and also those areas already harvested in Southern Europe.  Much of this news is now built into the market (having experienced the decline in prices since January), but as harvest reports around the world start trickling in, any evidence of good yields will continue to affect the market.

In a normal year by now most farmers would have sold approaching half of their new crop, although on this occasion there has been a tendency to wait to see what the crops in the ground are likely to yield.  Some farmers with minimal storage will need to sell at or around harvest, although, many farmers with smaller crops than usual will not.

The oilseed rape market has not been doing so well either, particularly in the last three months. The forecasts for large crops of soybeans from the US Midwest and other oilseed growing parts of the world have depressed the marketplace.  As can be seen in the chart, the price in Euros has fallen by proportionally more than the Sterling price simply because the Pound has moved slightly in the UK farmer’s favour in the last year.

 MATIF OILSEED RAPE PRICE (£ AND €) – Source: HGCA