July Arable Update

The harvest has begun in many parts of England.  Good ear-fill weather preceding harvest is thought to have provided the opportunity for potentially high yields for many combinable crops and indeed, whilst early days yet, appears to be the case. Most observers have noted reasonable to good tonnages for barley and oilseed rape in southern parts of England.

Late-sold old crop and early sales on new crops have been filling export sales made earlier in the year. Our domestic price is above that of almost all other exporters in Europe at the moment though, meaning we are particularly uncompetitive. This means that once the pre-booked trades are completed, the likelihood is that prices will have to match those of other EU exporters, of which the gap is at least £5 per tonne of feed wheat.

Shown is the UK Wheat Futures ‘nearby’ contract for the last 2- years. This is the wheat futures price of the contract that is nearest to expiring. It shows wheat prices falling fairly consistently since May 2014 from about £165/tonne to their current levels of about £125. Overlaid on the second axis is also the value of the euro in sterling. The decline has been continued and consistent. If the exchange rate was the only factor affecting wheat price, it would have fallen about £30 per tonne. In reality it has fallen about £40 per tonne. In other words, whilst the world has plenty of wheat, oversupply has been hitting the headlines daily, and importing nations have been walking away from further business, a massive 75 per cent of the fall in wheat price in the last 24 months has been because of the pound strengthening.

WHEAT FUTURES (NEAREST CONTRACT) – Source: HGCA

Most of the barley harvest is completed in the Southern parts of England, largely with low nitrogen and good levels of screenings. Whilst it appears the tonnage of malting specification will be good this year, the spring malting premium remains high at around £24/tonne over feed barley. This is surely likely to fall if the rest of the crop is as good, especially of course in Scotland. Selling a premium ahead of harvest is always a risk but for those who have tested their crop, it’s surely an opportunity.

The pulses and oilseeds too currently look well priced against feed wheat, with oilseed rape’s headline price comfortably over double the ex-farm wheat price (a frequent barometer of value). Whether it remains at this level is tricky to say, but this might be the one to sell if cash is required. But at the same time, whilst the collapse of the pulse price has been dramatic over the last few months, a £30 premium over feed wheat for beans and another £25 for human consumption specification returns a £175/tonne price for November. Again, with a potentially large crop about to come out of the field, we should take an opinion whether these premiums are likely to remain.