Scottish Farming Update | Winter 2018
Welcome to this quarter’s Scottish Farming Update, which is produced by our Farming Research Group and reports on market and administrative issues that affect farmers’ business decisions and on which they may need to act.
Arable crops
Global: Wheat
The global picture this autumn is dominated by the dry conditions in northern Europe and the drought in Australia both of which have reduced the competitiveness of their respective wheat sales to the global market and left space for competitors, such as Russia, to increase their market share in Asia and Africa. Australia has diverted much of its crop back to their domestic market (rather than export) to help provision the country during the drought.
Remaining stocks from last year’s record breaking harvest in Russia are helping to further boost an already respectable 2018 harvest and making Russian wheat very competitive especially at a time when European and Australian wheat has lost market share.
The USA has also had a good year in terms of wheat production but is competing with Canada for market share, both are sitting comfortably though, due to the gaps left by other major producers and the continued increase in global consumption.
Global: Oilseeds
The biggest ripple in the global market of oilseeds has been made by the trade tariff stand-off between the USA and China. It has meant that the USA, which usually exports large amounts to China, has had to offload its soya harvest on the rest of the world. Soya bean output in the 2018/19 marketing year is set to exceed production, leading to ample supplies. However, prices are set to firm up for both soya and EU rapeseed.
UK
Domestic prices reached highs of £180/T for feed wheat and over £210/T for malting barley during the summer/early autumn (for November deliveries), as reports of poor yields from across Europe reduced EU crop estimates and fanned flames about the prospect of the UK crop. Since then the wheat price has dropped back in the UK in part because of world supply including in particular Russia (see above) but also because the two large bioethanol plants Vivergo and Ensus have shut up shop. Vivergo is reportedly stopping for good, whereas Ensus is not thought to be a permanent shut-down. This is expected to release up to 1 million tonnes of wheat back onto the UK market, and so it was not surprising that the wheat price dropped £5/T in the week that the second (Ensus) closure was announced.
Looking ahead to the 2019 crop, the forward prices look relatively attractive despite recent falls; they were carried higher over the past year by the 2018 values (which were based on concerns about supply and other uncertainties in the markets). With good conditions throughout much of the northern hemisphere this autumn, analysts are optimistic about the likely size of the 2019 crop (e.g. the IGC is forecasting an increase in the world wheat area for the 2019 harvest), and if that comes to fruition then the regional markets will be well supplied, leading to falls in prices which will be particularly relevant if the UK is having to export wheat.
Brexit is adding to the uncertainty around the markets and, as such, merchants are offering wheat on ‘tarriff free’ prices. A tariff free price means that the price paid will be honoured and the wheat will be used within the UK. It is not possible to sell malting barley forward for harvest 2019 (as most of this is exported), but farmers can take the feed price and add the malting premium later. If we exit with no deal and have to rely on WTO terms, the tariffs to sell into the EU will be €90/T for cereals which is clearly punitive.
2018 Harvest
Harvest 2018 was characterised by autumn crop establishment in rather wet conditions followed by a prolonged winter which delayed spring drilling, and subsequent drought conditions lasting into August. The East of Scotland saw only 80% of the 1981-2010 average summer rainfall, whilst the UK overall received 73% of the average. The Scottish mean summer temperature was 1.1°C warmer that the average, with 123% of the average sunshine hours.
The implications of a difficult season are widespread. Total cereal and oilseed rape production, the area grown and yields in Scotland are estimated to have decreased in 2018 compared to the previous year.
Spring barley yields are expected to be lower by 10% compared to previous year, at around 5.3t/ha. This decline is probably due to poor performance of spring barley sown early in the spring, while crops that were sown after the heavy snow storm, ‘The Beast from the East’, did better. Winter barley yields are expected to increase by around 3%, to around 7.6t/ha.
Winter wheat yields are estimated to have stayed the same over the last year. It is thought that yields are likely to remain steady at around 8.1t/ha. Oats have also remained relatively steady with yields expected to decrease slightly by about 1%, to 5.6t/ha.
Oilseed rape yields have been estimated to decrease by around 9%, to 3.8t/ha. However, oilseed rape estimates are not as reliable as other crops due to small amount grown.
The trend was that 2018 spring crops were more affected by the challenging season than winter crops because the latter established well in the autumn. However some second wheats that established in wet conditions never really developed deep rooting and hence suffered more when the drought kicked in.
Also in this quarter’s update
- 2019 crop establishment
- Livestock update
- Fertiliser and fuel update
- Farm business news
