As featured in Arable Farming Magazine
Grounds for some new season optimism
by Arable Farming
As the focus shifts from the old season to the new, there is more confidence in the arable markets than a year ago. Cedric Porter looks at key cereal and oilseed categories.
Bread sales boomed during the pandemic as people made more of their own sandwiches.
There was a 5% increase in bread sales during 2020 to 1.78 million tonnes, according to market watchers Mintel.
Biscuits also proved a lockdown winner, with sales up 7.2% in 2020 to £2.96 billion, according to McVitie’s’ Annual Biscuit Review.
Unfortunately, a small 2020 harvest meant the UK was unable to fully capitalise on the bread boom.
Between July 2020 and the end of March 2021, 4.187mt of wheat was milled in the UK, according to AHDB.
That was 9% down on the season before and the lowest volume since 1995/96.
During the nine-month period only 3.061mt of British wheat was used in the national grist – the equivalent of 73% of the total and the lowest volume since 1993/94 when less than 70% of British wheat was used.
Easier autumn and spring planting seasons means there should be a lot more British milling wheat about in 2021/22.
Grain market consultancy ODA predicts a total national wheat crop of 14-14.5mt, around 30% more than in 2020.
That should mean that the UK does not need to import so much milling wheat, allowing the spread between UK and continental prices to widen.
British bread wheat has been trading at more than £200/t ex-farm for much of the 2020/21 season.
At the beginning of June, Paris milling wheat September 2021 futures were the equivalent of £189/t and £175/t for a year later.
The closure of pubs and restaurants hit beer and spirit sales hard.
Non-retail sales of beer plunged by 56%, or £7.8 billion in 2020, according to the British Beer and Pub Association.
In the nine months to the end of March UK maltsters, brewers and distillers used 1.243 million tonnes of barley, 13% less than in the same period in 2019/20 and the second lowest volume of the last 30 years, according to AHDB data.
Barley prices have been saved over the last season by a general shortage of cereals, with values at £185/t at the beginning of June.
The national malting barley area this year may be nearly half what it was last year at about 420,000 to 450,000 hectares, according to merchant Robin Appel, as growers dropped the spring barley they were forced to add to their rotations in early 2020 to make up for the shortfall in winter wheat.
The smallest oilseed rape area since 2004 will mean a small crop even if yields are much better than in recent years.
Plantings for the 2021 crop are estimated to be at 310,000 hectares and the UK’s OSR deficit could be more than 800,000 tonnes giving strong support to the domestic market, according to United Oilseeds.
Global stocks of vegetable oils are also tight which has led to record-breaking prices throughout the old crop season.
UK November 2021 delivered OSR prices were still at least £445/t in early June, according to AHDB.
November 2021 Paris oilseed rape futures prices were at €454/t (£390/t), highlighting the premium for UK-grown oilseeds.
Meat and dairy sales quickly recovered from early pandemic chaos, although pig production was severely disrupted at the beginning of this year by outbreaks of Covid-19 in processing plants and the impacts of African swine fever in Germany.
UK feed production has been maintained over the last year.
In the nine months between July 2020 and the end of March 2021, 9.019 million tonnes of materials were used by British feed manufacturers, less than 1% lower than the same period in 2019/20.
There was a 19% drop in feed wheat usage, reflecting the smaller 2020 British wheat harvest.
In contrast, barley usage was at a nine-month record total of 1.244mt, up more than a third on last season.
Soya usage was up by just 1%, demonstrating that feed manufacturers prefer to use alternative British ingredients rather than imports to fill gaps.
Global biofuel production fell by 8% in 2020, according to the International Energy Agency as demand for road and air transport fell during the pandemic.
Output is unlikely to get back to 2019 levels until 2022, but the second half of this year could see growing demand as the global economy bounces back – oil prices are currently at their highest for more than two years.
UK fuel supply was at 42.9 billion litres in 2020, according to UK Government figures, with just 6% of that total biofuel (2.5bn litres).
Total fuel supply last year was down nearly 18% on the 2019 figure, although biofuel supply was down by only 7%.
From September E10 petrol is due to become the standard, requiring 10% inclusion of bioethanol.
This should give a boost to UK bioethanol production, giving an extra outlet for British wheat.
Since 2018, only one of the UK’s major ethanol plants – Ensus on Teesside – has been operating.
It has the capacity to use one million tonnes of feed wheat a year.
The increased requirement for bioethanol means the mothballed Vivergo plant near Hull will be in operation in the coming months.
Imports and exports
Covid-19, Brexit and weather have upended UK trade in cereals and oilseed over the 2020/21 season and things are unlikely to return to normality during 2021/22. AHDB and HMRC figures show that in the nine months to the end of March 2021 the UK exported just 161,840 tonnes of wheat – 85% of it to EU markets.
The total compares to more than one million tonnes in the previous two seasons and up to 3mt in the past.
Imports of wheat between July and March were at 1.860mt, more than double last season.
Imports from the EU were at 1mt showing a need for soft wheat as well as the traditional hard wheat that the UK buys from further afield.
Volumes Despite larger domestic volumes, UK barley exports were down 23% to 1.14mt in the first nine months of the season, 80% of which was shipped to EU markets.
Barley imports were at 47,000t, slightly higher than the previous season.
During the nine months, the UK imported 1mt more wheat, barley and oilseed than it exported, the widest gap of the last six seasons and contrasted with a 1.6mt surplus in 2019/20.