July Arable Update

The harvest has begun in many parts of England.  Fine weather with several weeks of sunshine preceding harvest have accelerated the ripening of many crops.  Normally at this time of year, yields are too uncertain to comment on.  However, so far, almost all of those spoken with have recorded good yields for barley and oats with quality looking promising too.  A range of reports for oilseed rape has been picked up from excellent to average. For a visual chart on how dry and sunny it has been, go to http://www.metoffice.gov.uk/climate/uk/summaries/anomacts and click on ‘rainfall’ and then ‘sunshine’.

Elsewhere, harvest is also progressing.  The news from France is that rain has damaged the quality of their harvest.  This is great news for our milling wheat growers, but of course, bad news for the feed base price. Poor quality milling wheat becomes feed.  Quality issues have occurred in other countries in Europe too.

It is a good job that most farmers’ yields are currently coming off the combine well. The other part of the ‘output equation’, price, is not so rosy.

WHEAT FUTURES- NEAREST CONTRACT – Source: HGCA

The wheat futures chart above demonstrates just how dramatic the fall of combinable crop prices has been over the last 18 months, with £100 per tonne coming off the overall grain future’s price.  We must bear in mind this is a fall from an all-time high point, a place where almost nobody will have actually sold much wheat.  Even so it demonstrates the extreme that a change in global fundamentals makes in a relatively short period of time.  There have been no real crop production problems this season worldwide; no droughts in North America, no floods in Australia, no cold bursts in China and so on.  So, whilst some individuals will disagree, over large areas the crops are looking reasonable and harvest progress is good.  This might imply a barn-busting year.  All-grain production worldwide this year, according to the USDA is set at 2.446 million tonnes, down slightly on the 2013 estimate, but with a higher closing stock, the availability is higher.

From the UK, barley has taken the greatest price hit this month with the impact of the large global crop.  Ironically with a smaller domestic crop this year, traders are less able to sell large vessels and the focus is more on the easier-to-fill, smaller capacity coasters.  Furthermore, feed compounders are currently quiet, both as grass is plentiful and demand from other sectors is subdued.  The high quality harvest hints at an opportunity for those who harvest a good malting sample to catch the high malting premiums whilst they are there,as they might not last. 

The oils market is also currently quiet, explaining the fall in OSR values, with farmers and crushers in the US expecting a very large soybean harvest.  Soybean accounts for in excess of 50% of the global vegetable oil harvest so changes in oilseed rape production in the UK are simply not noticed.  Finally, whilst the price of pulses has slipped by £20 for feed quality over the last month (less for human specification) this is academic because there is nothing available.  Growers should be aware that there is lots of attention on their market prices currently because of policy, high prices, and economics favouring them over other pulses. This could be rather bearish come the autumn, so an early sale, albeit for forward delivery dates might be sensible.