The Black Swan

The end of crop year, harvest 2020 approaches, in the UK grain trade 30th June is the last day of season 2020.  Any grain untraded at that point becomes carryover stock into season 2021 and should be added to the predicted crop yield for harvest 2021.

The trading in UK harvest 2021 wheat began in earnest back on the 19thAugust 2019 when the November ’21 wheat futures appeared on the London Futures exchange.

Harvest 2022 wheat began trading similarly when the November ‘22 wheat futures appeared on the London Futures Exchange on the 8thJuly 2020, and it is today possible to trade grain all the way through to May 2023 delivery.

Within this office the range price of feed wheat prices paid on farm for 2020 harvest has been £140 – £216 per tonne ex farm.  So far harvest 2021 wheat has been sold to us between £150 – £201 per tonne and harvest 2022 has already traded around the £170 per tonne market.

All so good, but all so difficult!

The range of prices just goes to show the level of difficulty involved for the individual farmer.

Starting with each individual farm budgeted costs of production (which we all know have no bearing on the selling price!) average farm yields, and 5- or 10-year average sales prices achieved.

Moving on to the fundamentals of area sown and average yields, production versus consumption both UK and around the World.  Factoring in varying currency rates, rainfall, sunshine and crop reports.  Keeping one eye on the news feeds for changing Chinese and Russian political chicanery.  Monitoring the movement of grain in and out of the UK and its effects on available stock estimates domestically.  Speaking of which the latest figures for 2020 harvest to end of April ’21 show Net exports of 1.15 million tonnes barley. Net imports of 2.042 million tonnes wheat, 2.366 million tonnes maize, 565k tonnes OSR and 690k tonnes Soyabeans.   Perhaps in part explaining the end of season fall in ex farm wheat prices throughout June.  The imminent arrival of French new crop wheat and the improving UK domestic crop harvest outlook and timeliness brought about with a month of June sunshine adding further downward pressure, both 2020 crop and to the forthcoming 2021 crop.

To finally getting wrong footed by some random ‘Black Swan’ Event.  A black swan is an unpredictable event that is beyond what is normally expected, an extremely rare event with severe consequences that cannot be predicted beforehand but often with the widespread insistence that it was obvious in hindsight bias.

When they are positive, black swan events would be called game-changers.  When they are negative, which most black swan events tend to be, they take the shape of market sell offs or a pandemic shutting down global supply chains.  One mans negative can also be another mans positive.  Covid-19 could easily be called a black swan.  Whole swaths of the economy shut down and struggling but for UK farming plc, demand for food has rarely been better. Livestock prices at the markets are firm and grain is in demand to feed them. The general public are cooking and baking more and continue to empty the supermarket shelves.

As we emerge blinking back into freedom at the end of covid, does the Yorkshire farmer have to go back to budgets, crop watching and news feeds, or is this most recent black swan a game changer and a reset for all agricultural commodities.

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