AgriFacts August 2019 Your monthly roundup of news, prices and other farming matters
Grain Market Commentary The outlook for the UK’s grain prices is difficult to predict, given the multitude of potential scenarios that could play out over the next few months. Not only do we have to contend with the complexities of the global grain market, but our domestic pricing structure will be significantly impacted by the quality and yield of the UK crop, as well as the looming threat of a nodeal Brexit on Halloween and all the trade implications that come with it. The global supply and demand picture for wheat would suggest a more bearish than bullish outlook. However, whilst wheat production will increase significantly year-on-year, it is the corn market that will ultimately drive the underlying feed wheat values. There is currently some considerable uncertainty surrounding the corn market, as traders wait to see the outcome of the key USDA report on August 12th. There is a big spread within the trade guesstimates on the likely acreage, with numbers ranging from 80 to 91mln acres. This report has the potential to significantly move both the US and global corn market and could have a big knock on effect on wheat values. In addition to the uncertainty on corn, there are also some questions about wheat production in Russia. Pre-harvest estimates suggested a big annual jump in output, putting the crop over 80mln t, but some exceptionally hot weather during late May and June seems to have undermined yields, and whilst harvest is not completed yet, the final crop number looks more likely to be 76mln t. Conversely the wheat harvest in Northern Europe has proved to be better than expected so far. The French harvest is generally going well, and whilst there have been some lower proteins, yields have held up well and the crop could reach circa 38mln t. It is a similar picture in Germany and Scandinavia. In the UK, the wheat harvest is just getting underway and the reports to date have been good. The early crops are exceeding the 5-year average and quality is generally ok, but proteins are perhaps a little on the low
side. However, a bumper harvest poses its own set of problems for the UK market. We are expecting a wheat crop a little over 15mln t, which given the reduction in ethanol demand, will leave the UK with a potential 1.7mln t exportable surplus. It will be the price we can ship the over-supply at, that will ultimately determine the value of our domestic wheat market. With the current Brexit deadline, we only have 3 months of tariff free access to the EU. It is the EU that would typically take the majority of the UK’s grain surpluses, so a hard Brexit could have serious consequences for the UK wheat market, that is unlikely to be fully solved by a potential further depreciation of sterling. We understand that a hard Brexit would give the UK 3rd country status and any shipments would require an import licence under the TRQ (Tariff Rate Quota system) arrangement at a levy of €12, or outside quota, would be subject to the full €95 import tariff. The TRQ allows 2,378,387mt of wheat to be imported into the EU in 4 quarterly tranches at the €12 levy, and we will have to compete with other 3rd country imports to gain access to these licences. The cost of doing business with the EU in this situation would currently fall directly on our domestic market, and in a no-deal scenario, this cost is likely to be reflected at the farm-gate. There are a lot of variables to negotiate before we can see a clearer picture for our wheat market. The USDA report on 12 August will give us some answers, but for the UK farmer there are a lot more questions to come. Today’s wheat prices may be lower than a year or 6 months ago, but with all the uncertainty facing the market, a disciplined risk management plan is essential. Jonathan Lane ADM Agriculture’s Head of Grain Trading
Rural Payment Agency Updates Countryside Stewardship and Environmental Stewardship Payment Update: The RPA have announced all stewardship payments relating to 2019 annual revenue claims will be paid in one full payment from the beginning of December 2019 to the end of June 2020 once the processing of the claim has been completed. This will replace the existing pattern of two separate payments.
Countryside Productivity Small Grant Scheme Round 2 Launched Round 2 of the Countryside Productivity Small Grant Scheme has been launched. The grant provides funding towards specific items of equipment to improve technical and resource efficiency, animal welfare and nutrient management. Grants are available for 40% of standard costs of the equipment, minimum £3,000 and maximum £12,000. Applications should be made online using the Rural Payments system, and closing date is 3 September. More details and a list of the equipment see: https:// bit.ly/2NI5wcI or contact the Agribusiness Team: https://bit.ly/2VVTnoj
Market Prices Month (ex farm) Midlands
Feed Wheat
Feed Barley
Oilseed Rape
Currency
August 2019
£130-135/t
£115-120/t
£322-327/t
£/€ = 1.09
September 2019
£135-140/t
£125-130/t
£327-333/t
€/£ = 0.91
October 2019
£137-142/t
£127-135/t
£330-335/t
$/£ = 0.82
Milk Data
Avg Monthly Price
UK Farmgate Milk Price
28.09ppl
Fuel/Straw/Silage
Price
Fertiliser
Price
Red Diesel
53.52p/litre
34% N AN (bags UK) £/tonne
£255-258
Big sq Baled Wheat Straw
£47.00/tonne
0:24:24 blend (bags) £/tonne
£278-282
Big Bale Hay
£94.00/tonne
20:10:10 blend (bags) £tonne
£260-264
Finished Steers
Finished Lambs
Finished Pigs
327.1
414.6
149.78
p/kg dwt
Key Dates Date
Regulation
Restriction If you have been granted a derogation by the RPA, you may be able to cut or trim hedges throughout August, to sow oilseed rape or temporary grassland.
1 August
RPA
1 August
Cross compliance
For those in an NVZ: Start of closed period for applying organic manure with a high readily available nitrogen content (i.e. slurry/manures/sewage sludge) to tillage land on shallow or sandy soils except where crops will be sown on or before 15 September.
20 August
Cross compliance
EFA Catch crops must be established (retained until at least 14 October)
1 September
RPA
1 September
Cross compliance
For those within an NVZ: Start of closed period for applying organic manure with a high readily available nitrogen content (for example, slurry, poultry manures or liquid digested sewage sludge) to grassland on shallow or sandy soils.
15 September
Cross compliance
For those within an NVZ: Start of closed period for applying manufactured nitrogen fertilisers to grassland
16 September
Cross compliance
For those within an NVZ: Start of closed period for applying organic manure with a high readily available nitrogen content (for example, slurry, poultry manures or liquid digested sewage sludge) to tillage land on shallow or sandy soils which have been sown with crops on or before 15 September.
You can cut or trim hedges and trees from this date.
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Fisher German is a limited liability partnership, registered in England and Wales. Registered number: OC317554 Registered office: The Head Office, Ivanhoe Office Park, Ivanhoe Park Way, Ashby de la Zouch, Leicestershire LE65 2AB Regulated by RICS Fisher German LLP has tried to ensure accuracy and cannot accept liability for any errors, fact or opinion. Please do not use this as all the advice needed to make decisions.