Market Update

AHDB released a revised version of their Early Bird Planting Survey which takes place each autumn to assess national cropping intentions. To review the report in full, please see:

• The total area forecast to be planted with wheat is 1.5 million hectares – the smallest acreage since 1981. This a 17% decline on the 2019 area and a 7% decline since the initial survey in November. This figure is already being criticised by the trade as independent estimates believe it to be much lower than this.
• The intention to drill spring wheat has doubled since November, but only 2% of this has been planted to date. According to the survey, as of the 14^th February 287,000 hectares of both winter and spring wheat were yet to be drilled.
• It is interesting to see that there are significant regional variations – Yorkshire and the Humber are one of the regions facing the worst of the wet conditions. Additionally, where the crop has been drilled, the weather has played a large role in its current condition.
• The area forecast for winter barley comes in at 347,000 hectares. This is 23% back on 2019 and 9% less than growers intended to plant when surveyed in November.
• The spring barley area is forecast at a staggering 1 million hectares – a 47% increase from 2019 and 10% more than intended back in November.
• The area forecast for oats has increased by 26% from 2019 to 229,000 hectares. The regions impacted by the worst of the conditions have seen the greatest movement from winter to spring oats, with the East Midlands more than doubling their spring oat area this year, with the West Midlands and the North East doing likewise.
• As all of the OSR was drilled by the time the initial November survey was carried out, the February survey indicates how much of that area has been lost over the winter. A further 38,000 hectares of OSR have been lost over winter, leaving a total area of 361,000 hectares. This is a third lower than last year.

The AHDB have now, rather usefully, taken these estimates to look at crop production figures:

1. BEST CASE SCENARIO – assuming we see no further crop losses and we take the area forecast produced by the early bird survey verbatim, we can multiply this figure with the five-year average.
2. MID-RANGE SCENARIO – we take a percentage of the area estimates and multiply this by a best/worst average yield to get a mid-range production figure.
3. WORST CASE SCENARIO – we take a significant cut to the area figures and multiply this by the five-year low yield.

WHEAT

• Best case scenario, we could be looking at a figure of 12.63 million tonnes (the planting survey figures multiplied by the five-year average yield of 8.4 tonnes per hectare).
• Worst case scenario, we could be looking at 9.01 million tonnes (this assumes that no further wheat is planted beyond the survey date of 14^th February and is multiplied by the average wheat yield from the wet 2012 harvest of 7.4 tonnes per hectare).
• The mid-range scenario would give us a production figure of 10.74 million tonnes – the lowest wheat production seen in the last 20 years by almost 1 million tonnes.
• Regardless, it is important to remember that we will be looking at a considerable crop carryover on top of this. Recent estimates have forecast the wheat carryover to be 3 million tonnes.

BARLEY

• Best case scenario, we could have a barley crop of 8.5 million tonnes. If there are no further winter crop losses and all winter barley drilled achieves the five year average of 7.1 tonnes per hectare, and all intended spring barley is drilled and achieves the five year average of 5.8 tonnes per hectare, we will see a total barley crop of 8.5 million tonnes.  
• Mid-range scenario would give us a barley crop of 6.4 million tonnes.
• Worst case scenario, we could have a total barley crop of 4.48 million tonnes. As winter barley requires a vernalisation period, it is very unlikely that any further winter barley will be planted now. This figure therefore assumes a 20% loss of what has been planted. The yield used to calculate the winter barley tonnage is 6.4 tonnes per hectare, the yield achieved in the wet harvest of 2012. As for the spring barley area, this figure assumes just 50% of the intended spring barley acreage is drilled and achieves a five-year average low yield of 5.2 tonnes per hectare.

Whilst the above may make for some bullish reading, please consider the impact that a potentially firmer pound could have on the market regardless of the tonnes produced.

Pre Brexit, sterling was valued at 1.35+ against the Euro, and as its recent worse, it sunk to 1.08 last summer. Currently, sterling is valued at 1.20 against the euro and in spite of day to day movements, the general trend is upwards. Positive trade talks and any trade agreement developments between now and harvest could further strengthen the pound. Moving forward, ex-farm values need to priced in accordance with imports to remain competitive. In other words; yes, the market may firm if we see a worst case scenario wheat crop of 9 million tonnes – but only to the level of an imported equivalent.

In line with a firmer pound, the London LIFFE wheat future for November 2020 is down £2.25/T this morning a £159.00/T. this is the first time that the wheat future has dipped below £160.00/T ex-farm since the beginning of the month. Having been £160.00/T ex-farm for harvest collection at its recent best, this benchmark value is now offered for January 2021. Feed barley continues to trade at a £30.00/T discount to wheat and buyer interest remains extremely flat.

As for old crop values, £150.00/T ex-farm is now bid for spot collection, a slight decline on recent values. Some milling opportunities are available for full specification and various “low grade / biscuit jobs” – please discuss with the office. As for feed barley values, sellers seem to be looking for the £130.00/T ex-farm mark or spot collection whilst buyers are putting it somewhere below this – £127.00/T ex-farm could therefore be a more realistic value for those of you looking at spot collection.