Scrutton Bland Agricultural Newsletter

Making hay while the sun shines or watching profits get scorched? Nick Banks, Partner and agricultural specialist at Scrutton Bland reviews the 2018 cereals harvest.

A s the seasons change it is at this point in the year that data starts to emerge about the 2018 UK cereals harvest, and we can start to identify trends and consider the financial ups and downs for those farmers with their crops in store. Over what has since turned out to be the hottest summer in England since records began, I was in regular contact with my farming clients checking how they were fairing in the weather. This is just one of the replies I received: “It’s bloody hot and dry, and we’re busy on the combine. Wheat is at 11 / 12% moisture yields, which is down by 10 to 15 % on last year.” Interestingly though, it would appear that this analysis from the field is consistent with the national picture we are now seeing. The AHDB Planting and Variety survey recently reported a UK wheat cropping area of 1,751k/ha. Winter wheat yield data currently stands at 7.8t – 7.9t/ ha compared to the five year average of 8.2t/ha.

This derives a projected yield for 2018 wheat harvest 13.7m/t which is below the five year average: (see table above) The reduced output this year will give rise to concern over the domestic market supply, and this is being reflected in futures prices. This time last year, in my article on the 2017 harvest I mapped the wheat futures prices on a graph and it is interesting to see from the graph above how prices in November compare to the future price set in 2017 – prices are up some 20% on those predictions: What does this tell us? The low harvest yield is compounded by the position of UK opening wheat stocks in June 2018 which were at a four year low at 1,718 kilotons, which may give markets cause for concern about supply meeting demand.

So, the short term forecast is encouraging and indicates that prices may strengthen. Reports suggest that farmers are holding on to crops, and that those with on-farm storage and sufficient working capital to establish 2019 crops, can ride the market to maximise price. Those farmers in pools will need to have confidence that prices will be optimised and will need to analyse the performance of those to whom they’ve committed their crops. of the pound against the dollar and euro is another factor to cause spot prices to climb. The outlook for the harvests of other key EU member states does not look that dissimilar to the UK, and tight domestic markets in Europe are anticipated, notably in Germany where reports suggest it may be necessary to increase imports to meet demand. Foreign currency is another element which can have an influence on crop prices. The softening

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