The autumn drill down
Changes in arable rotations for 2015
With autumn upon us, the harvest will be completed by the time this is read and much of the autumn drilling will be planned and ready to go, if not already in the ground. What rotational changes are we expecting to see this year?
It's early in the season to be drawing up crop area estimations, largely because so much of the drilling is weather dependent. We have seen that in two of the last three years with higher spring cropping, higher fallow areas and so on. However, weather permitting, changes will be based on economics, politics and advances in technology. Some changes are sudden, taking place over a single year while others are more gradual requiring a number of years.
It is generally thought that the wheat area for 2014 harvest totalled just under 2 million hectares. This is fairly high compared with the average wheat area in the UK over the last ten years. But it is likely to decline slightly for 2015, not only because of the annual swing of rotational requirements, but to make way for a third crop for many farms that currently only have two, as dictated by the greening regulations (see following article). Furthermore, at the sort of prices available today for wheat (£123/tonne ex-farm for spring next year and £130/tonne ex-farm at a push for next harvest crop), it would be expected that growers would seek out alternatives.
One of the main changes that is likely to occur for 2015, is a relatively sharp decline of oilseed rape possibly from the recent levels of over 700,000 hectares to possibly 650,000 or less; a five-year low. This is likely to be coupled with a comparable rise in pulse area. The price of oilseed rape has fallen at the time of writing to sub £250/tonne ex farm for 2015 harvest. Meanwhile, the prices of pulses, while having taken a knock in line with the other crops, have managed to continue to close the gap with oilseed rape. This is making their gross margins considerably higher than for other break crops and indeed even wheat in many cases. Beans, for example, have a considerably lower cost of production compared to oilseed rape. Also, while their yield does tend to vary considerably, is usually expected to be higher than winter rape. The newly published John Nix Farm Management Pocketbook for 2015 identifies this change in the economics of broadacre farming. It was only a couple of years ago when oilseed rape overtook wheat as the highest combinable crop gross margin. But there is nothing more bearish than a high price and this led to overproduction and a falling marketplace for oils (largely in China for food and the EU for biodiesel). The loss of neonicotinoid seed treatments for oilseed rape is also likely to be playing its part.
The requirement for farms to grow a third crop in their rotation (above 30 arable hectares) and the option to use leguminous crops to account for their ecological focus area (EFA) (see following article) has created significant interest amongst growers. Pulse seed breeders have reported a substantial hike in sales. Dramatic crop changes could also be seen in the root crops this year, particularly sugar beet. A large surplus of sugar throughout Europe, coupled with a low global sugar price and considerable stocks held by British Sugar means that the price for the next campaign has dropped sharply. In addition British Sugar is actively looking to contract less area. This will inevitably result in a reduction of cropped area, possibly 5 to 10 per cent.
The John Nix Pocketbook for 2015 harvest demonstrates the changing economics. The highest broadacre combinable crop gross margin is marrowfat peas. The area of these peas is controlled by contracts so is unlikely to rise substantially in the coming year unless more contracts are awarded.
However, the next highest crop is also a pea, the blues. Pulses have lost a lot of favour with growers in the last decade with a halving of pea area since 2004 and quartering since 2001. Variable yields, especially since the removal of simazine as a herbicide in pulses, and low prices have discouraged farmers from growing pulses. This might be about to change, at least for a year or so.
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We are grateful to Andersons, the farm business consultants, for their contribution to this bulletin. We have taken great care to ensure the accuracy of this newsletter. However, the newsletter is written in general terms and you are strongly recommended to seek specific advice before taking any action based on the information it contains. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. © Smith & Williamson Holdings Limited 2014 code: 14/871 Expiry date: 28/02/2015
