UK farmers will need to be pragmatic and sell into any price rises during a difficult coming year for arable markets.
This year’s wheat harvest is expected to be up about 700,000 tonnes on last year’s crop and at Frontier’s Harvest Review near Lincoln last week, the firm’s marketing chief said the world was likely to remain well supplied with grain in the coming months.
With this in mind, the firm suggested there was little chance of a major positive price move anytime soon.
Simon Christensen, grain director at Frontier, said: “We do not see any particular upside to prices. With slow exports this does not look like it will change in the short-term. If there is any form of price lift, we would recommend selling into it.
Beans could see a 25-30 per cent increase in supply due to CAP reform constraints and rotational benefits.
Andy Bury, pulse manager at Frontier, said the need to have a 5 per cent Ecological Focus Area and constraints brought on by the three crop rule, as well as black-grass control measures, meant farmers were harvesting a large crop.
But Frontier suggested demand had also increased within the UK and internationally.
Peas could also see a 10-15 per cent increase in supply on last year.
“We have growth in production numbers around the world. This means we will see relatively flat prices because of global production.”
Despite current arable prices being some of their lowest in the past five years, Mr Christensen claimed good yields this year meant some farmers would be able to make profits.
He said: “If you look at the top 20 per cent [of farmers], they would say their yields will carry their output and prices.”
Many farmers enjoyed good quality harvests this year. Frontier underlined Farmers Guardian reports this may reduce milling imports to the UK if grain processors opt to use a larger share of domestic produce.
But with quality generally improving for UK grain farmers, milling premiums could come under pressure.
Mr Christensen said: “We would expect farmers to put more milling wheat in the ground going forward.”
He said there were currently £10-20/tonne premiums on milling wheat, but this could come under pressure during the next year.
“You could have a shocking year but, in theory, premiums could be under pressure going forward. There will be people who are not traditionally milling wheat growers going into milling wheat.”
An increase in planting and yields could mean farmers harvest a larger crop than last year.
Simon Christensen, grain director at Frontier, said: “Barley will be up. We have 4 per cent more winter barley and 2 per cent more spring barley. Yields are better than anticipated.”
But a large surplus of feed barley may be difficult for UK exporters to move at current prices.
“At the moment, we sit with a large surplus of feed barley which looks quite difficult to move in quantity.”
He claimed feed barley was currently seeing heavy competition on world markets and farmers may be receiving £100/tonne or less.
The malting barley market is likely to come under pressure from due to falling demand for produce for whisky.
With oilseed rape becoming more costly to grow and values under pressure, there could be a reduction in supplies in the coming year.
Mr Bury said: “It is a similar picture to other commodities and one of the drivers is oil prices coming down puts oilseed rape values under pressure.”
But Mr Bury said other crops were seeing pressure and oilseed rape would remain important in arable rotations.
This year, oilseed rape farmers are likely to harvest a similar-sized crop to last year’s 2.2 million tonnes.