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Agriculture news: wheat is where it’s at

The Agriculture and Horticulture Development Board (AHDB), looks at changes in production for key crops and how they reflect the evolution of sentiment around inputs and prices.

The Department for Environment, Food & Rural Affairs (Defra) has recently published UK area yield and production figures for 2021, revealing some notable headlines. While the figures are provisional, they show that wheat and oat production is up year on year, but that rates for barley and rapeseed are down.

Its main findings are:

  • Wheat output has rebounded, but there is a mixed picture on yields

  • Barley crop has reduced as areas shifted back to wheat

  • Oat crop was the biggest since 1972

  • Oilseed rape (OSR) crop was the smallest since 1989

Agriculture news: wheat

An increase in wheat’s growing area to 1.8 million hectares (Mha) means yield has grown from 9.7m tonnes (Mt) in 2020 to 14Mt. Yields, however, are varied across the UK, with a provisional average national yield of 7.8 tonnes per hectare (t/ha), below the 2016 – 2020 average. This has resulted in a crop size smaller than many expected.

Although there is some disagreement about true crop size, there is also a quality issue to contend with. Provisional data from the Cereal Quality Survey (CQS) shows only 23% of UK flour millers’ Group 1 samples meet a typical Group 1 specification. As a result, premiums are stretching. According to AHDB figures, UK milling wheat was quoted £36 per tonne (/t) above the price of feed wheat (ex-farm) for the week ending 14 October 2021, compared with £22/t at the same point last year.

Prices of new-crop feed wheat futures are also high, owing to tight supply. With such high domestic prices, the UK may witness a further rise in the planted area for the 2022 harvest. However, growers have to contend with fertiliser supply issues, meaning higher input prices, and may exercise some caution. They also face agronomic constraints with the already increased wheat area. Crop rotations are key, and there may not be room for significant expansion.

Agriculture news: Barley

Defra estimates UK barley production at 7.1Mt. This is 1Mt lower than figures from 2020, which is due to the 17.2% reduction in planted area. Relative to the area drop, production’s fall of only 12.4% is due to the shift to growing more winter barley, which has a higher yield than its spring variant.

Feed barley discount to feed wheat (ex-farm) resided at £14/t in mid October, compared with £46 during the same week last year, according to the AHDB corn returns survey. This tight discount will likely reduce the attractiveness of barley into animal feed rations compared with last year.

Agriculture news: Oats

At 1.1Mt, the 2021 oat harvest has increased 11.4% on 2020 figures, and is the biggest crop since 1972. This is down to a rebound in yields, particularly in England, outweighing a reduced planted area.

Although the oat crop remains small compared with barley and wheat, it is now larger than OSR, and its increased availability means it could be used more in animal feed. In mid-October, ex-farm feed oats were priced at a £61/t discount to feed wheat.

Although the oat crop remains small compared with barley and wheat, it is now larger than OSR, and its increased availability means it could be used more in animal feed. In mid-October, ex-farm feed oats were priced at a £61/t discount to feed wheat.

Agriculture news: OSR

Defra figures suggest an oilseed rape crop of 977kilotonnes (K/t). This is the first time in 22 years that domestic OSR production is below 1Mt. The planted area of oilseed rape sharply decreased for the 2021 harvest, which was slightly counteracted by a rise in yields.

Prices at the point of planting were somewhat elevated from previous years. As a result, the UK may see area rates recover. However, industry is still concerned about the viability of OSR. Even a price of £1,000/t wouldn’t offset the risk of a crop failure. With this possibility in mind, farmers may still be cautious, therefore limiting any increase in total growing area.   

This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of the NatWest Group Economics Department, as of this date and are subject to change without notice.

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