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Agribusiness News June 2024 – Cereals and Oilseeds

31 May 2024

Old-crop summary & 2024 prospects

In 2023, production in the UK of all major cereal crops declined. The wheat harvest was estimated at 14 Mt, a 10% decrease from 2022, while oat production fell by 18% to 830,000 tonnes. Barley production was just under 7 Mt, down 5.7%, and rapeseed production dropped 11% to 1.2 Mt.

The reduction in wheat production included a 5.1% decrease in the wheat-growing area to 1.7 million hectares, as farmers shifted towards barley and rapeseed, which both saw increased plantings in 2023. The UK wheat yield also declined by 5.2% to 8.1 tonnes per hectare. Looking ahead to 2024, the wheat-growing area is expected to shrink by 15% to 1.463 million hectares, the smallest since 2020.

Barley production in 2023 saw a 9.9% drop in spring barley to 3.8 Mt and a slight 0.2% decrease in winter barley to 3.2 Mt. Despite increased planted areas for both, yields fell 10% for spring barley and 4.5% for winter barley. In 2024, the total barley area is projected to rise by 8% to 1.236 million hectares, with a significant decline in winter barley area offset by increased spring barley plantings. Winter barley is estimated at 355,000 hectares, a 22% reduction, while spring plantings are forecasted to increase by 29%.

Oat production in 2023 hit its lowest level since 2016, due to a 5.1% reduction in area and a 13% decline in yield. For 2024, the oat-growing area is expected to increase by 26% to 209,000 hectares, with a drop in winter plantings more than compensated by a sharp rise in spring plantings. Only 37% of the winter oat crop is rated as good or excellent.

Rapeseed production also fell in 2023, with a 7.2% increase in area insufficient to offset a 17% yield decline. The total area for 2024 is expected to decrease by 28%, reflecting poor autumn and winter growing conditions. The projected 280,000 hectares would be the smallest area since 1984. Only 31% of the winter oilseed crop is rated as good or excellent, indicating poor national harvest prospects.

Given the current wheat crop conditions, with only 34% rated as good or excellent, wheat imports could exceed 2 Mt in 2023-24, the highest level since 2020-21. From July to January, wheat imports totalled 1.251 Mt, a 55% increase year-on-year. Most imports are high protein milling wheat, and the flour milling industry continues to consolidate, with 32 companies operating 51 mills, the four largest companies accounting for 65% of UK flour production.

Market price drivers

Global grain markets rallied in May due to dry conditions in Russia affecting crop prospects. However, the bullish momentum has recently waned with recent rains despite ongoing market volatility driven by weather impacts on crop production. The International Grains Council reduced its forecast for 2024/25 global wheat output by 3.0 Mt to 795 Mt, following downgrades to Russian and Ukrainian crop outlooks to 85.5 Mt and 23.7 Mt, from previous estimates of 90.4 Mt and 24.5 Mt, respectively.

UK feed wheat futures gained less than the global market as May closed out, influenced by sterling’s rise against the euro and US dollar. November 2024 UK feed wheat futures increased by £16/t over the last two weeks of May, closing at £218/t at the time of writing and several pounds off the high.

Planting progress in Europe and the US remains a key focus for the maize market, alongside concerns over the Brazilian Safrinha harvest. Despite expectations of heavy maize supplies in the long term, ongoing wheat concerns could drive additional feed demand towards maize.

Global oilseed markets rose last week, led by soymeal and rapeseed. Concerns about crop sizes in major producing countries continue to extend rapeseed’s price premium over soyabeans. Predictions of a drawdown in rapeseed stocks also support prices compared to soyabeans.

 Mark Bowsher-Gibbs, 07385 399 513

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